After doing a bit of research into sponsoring foreign workers from a UK based company, I came across something interesting; according to the UK Border Association, a small business must have employer's liability insurance coverage for a minimum of £5 million, if they employ anyone. I found that fact by digging through the required documents necessary for a license to sponsor foreign workers: found here.
(The first list of documents is for Start-ups, or companies that are younger than 18 months. They say that when applying for the license, one of the mandatory documents you must have is proof of Employers Liability Insurance coverage for a minimum of £5 million, although you have to scroll down the pdf to see it.)
At first, I couldn't believe that this is true. I mean, how could a micro-ISV require that much insurance coverage for 1-2 people, or just to hire one more person? Then I read this article that said: 200,000+ businesses are breaking the law in the UK by not having ELI.
My question(s) is/are:
- Is this truly a required (almost hidden) expense for operating in the UK, and hence a big problem that is not often publicized?
- At what point do you have to attain insurance? Is there a certain size you have to grow past, a certain turnover you must have? Is it OK if you're a one man operation, but as soon as someone else joins then it's a whole different ballgame?
- What if there are two of you, and you are both co-founding directors that started at the same time? Do you need insurance as soon as you are incorporated, or only when you hire someone new that isn't a co-founder?
- What is the definition of an employee? Is someone who takes equity an employee or do they have to be on salary, or both/neither?