Directors status, new start up

[Newcompany]

Hi All,

I am one of 3 Directors of a new business start up. We will all be unpaid until such time as the company generates sufficient funds.

Legally are we considered employees? and therefore must have Employers liability Insurance?

 

[TotallySport]

If your directors in a company, and at some point your expecting a wage (as well as other benefits) then you are employees and you need employee liabilty insurance.

 

[Anna Chandley]

If your directors in a company, and at some point your expecting a wage (as well as other benefits) then you are employees and you need employee liabilty insurance.

Not necessarily, directors are officers of the companies not employees. Of course they could also be employees as well as officers but they do not need to be.

You are only required by law to have employers’ liability insurance for people who
you employ under a contract of service or apprenticeship. So if you don't have contracts of employments you don't need employers liability insurance but you may require insurance once you start to receive a salary.

I am not an expert in this area so you should probably seek an expert opinion to be sure.

 

[TotallySport]

Not necessarily, directors are officers of the companies not employees. Of course they could also be employees as well as officers but they do not need to be.

You are only required by law to have employers’ liability insurance for people who
you employ under a contract of service or apprenticeship. So if you don't have contracts of employments you don't need employers liability insurance but you may require insurance once you start to receive a salary.

I am not an expert in this area so you should probably seek an expert opinion to be sure.

So if they work for the company and they are paid a wage or salary, for services to the company (IE working) they are an employee, and as such need employee liability insurance, which is what I said.

 

[Anna Chandley]

No, a director can work for the company and receive remuneration without being an employee. They can have a contract for services an employee would have a contract of service.

 

[TotallySport]

No, a director can work for the company and receive remuneration without being an employee. They can have a contract for services an employee would have a contract of service.

But in that case they wouldn't be drawing a wage or salary.

 

[Newcompany]

Thanks for the replies.

We do not especially want to be employees, rather we would prefer to be providing "management" services to the company. We had considered this to "cover" us from the employment perspective and therefore remove the need for employers liability insurance.

(I should add that the reason for all this is to reduce required expenditure in the early weeks/months of the company not to avoid compliance . As soon as we have appropriate income streams the matter will be reviewed)

Thanks for the help so far, appreciated. If there is someone available who can give a definitive answer that would be really appreciated.

 

[TotallySport]

Thanks for the replies.

We do not especially want to be employees, rather we would prefer to be providing "management" services to the company. We had considered this to "cover" us from the employment perspective and therefore remove the need for employers liability insurance.

(I should add that the reason for all this is to reduce required expenditure in the early weeks/months of the company not to avoid compliance . As soon as we have appropriate income streams the matter will be reviewed)

Thanks for the help so far, appreciated. If there is someone available who can give a definitive answer that would be really appreciated.

Trying to cut costs may sound like a good idea, but things like insurance isn't a good idea, lets say one of the "Directors" trips over a computer cable and wants to claim against the business (and they can and do) if you don't have the employees liability insurance your company will be closed before it starts.

Your now going to say you trust each other and that wouldn't happen, and it might not, until the direct that is off, cannot contribute due to their condition, the other two directs start getting the huff, the direct who fell cannot pay his bills etc etc etc.

Ring an insurance company for information, it can be very inexpensive so even if your not planning to find out how much piece of mind is.

Also make sure you have a detailed articles of assosiation.

Good Luck

 

[abpublish]

Be very careful here. I used to work in insurance and employer's liability is a legal requirement for all your employees. You cannot make up roles such as "providing management services" to get round this. This was a common trick that the government got wise to years ago.

If you are working day to day for the business then you are an employee, irrespective of any job title you may give yourself. I think the only exception is when you hold more than 50% of the shares which classifies you as an owner.

So make sure you get some expert advice before you make a decision that could land you in trouble.

 

[lockyer]

The short answer is yes you do. If a limited company has more than one employee, then you need EL cover.

For the purposes of this Directors ARE employees, it is completely unrelated to how you receive your renemeration. In the same way that if you had a labour only contractor, and you only paid him for his/her time, then you still need EL cover by law.

To be a 100% sure you need to be having a chat with a good independant insurance broker, and if you do need the cover, remember it doesn't have to cost a fortune.

 

[Saxon Heights]

I'd say you do, you can check it out here: http://www.hse.gov.uk/pubns/hse40.pdf.

No for the pitch, we can do you online quotes and comparisons here: http://www.apexinsurancebrokers.co.uk

Depending on what you are doing, I wouldn't have thought an EL policy would be particularly expensive. However if you go without, the fine can be up to £2500 PER DAY! So make sure if you don't buy it, you definitely don't need it.