26th May 2011 | Employers' liability

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Don’t know what an employer reference number is? Not sure why you need one? Can’t remember if you have one?

No problem. Here’s why your employer reference number (ERN) is important; to you, to us and to your insurance.

(Warning: acronyms ahead. Lots of them.)

So, what’s an ERN?

Every business registered with HM Revenue and Customs (HMRC) as an employer is given an ERN. It’s a unique set of letters and numbers used by the taxman to identify your business. It’s made up of a three-digit HMRC office number and a reference number unique to you.

You might’ve seen it referred to as an ‘employer PAYE reference’ on tax forms. It’s also on a payslip, P45 or P60 and it’s usually in one of these formats:

123/Az12345

123/A12345

What’s it used for?

It’s mainly for end-of-year PAYE returns. Missing or invalid ERNs are the most common reasons for HMRC rejecting end-of-year returns.

Employees might ask you for it too – they’ll need it if they’re applying for things like tax credits. You might also have to include it on their payslips, if you don’t already.

And, if you’ve recently bought or renewed an employer’s liability insurance (EL) policy with us, it’s likely you’ll have noticed us badgering you for your ERN. This is because legislation (effective 1 April 2012) means you have to declare it when buying or renewing your EL insurance.

Some insurers have made ominous noises about cancelling customers’ EL policies where they don’t have a corresponding ERN. It’s best to make sure your insurer has yours. Being without EL when you’re legally required to have it isn’t something we’d recommend.

Why does it have to be declared?

In the event of an EL claim it’s necessary to identify – quickly and efficiently – all the companies where the employee in question has worked. EL insurance claims can occur years after the alleged event (in cases of exposure to harmful substances, for example) and trawling through mountains of paperwork to find the relevant insurer is both time-consuming and problematic.

It’s hoped that ERNs will streamline this process and make life a whole lot easier for both claimants and insurers alike.

Searches for employers’ liability insurers will be undertaken by an independent industry body called the Employers’ Liability Tracing Office (ELTO). They’ll use a centralised database combining ERNs and information on EL policies to track down and match-up relevant insurers to companies on the receiving end of claims.

Although this sounds a bit ‘big brother’, it does benefit you. EL insurance is a legal requirement for most companies with employees; if you’re faced with a claim the ELTO can prove you had the insurance at the time you employed the claimant. Which means your insurer foots the bill and you don’t.

It’s fair to say the insurance industry isn’t exactly renowned for thinking ahead. But this represents a positive, proactive move and a genuine commitment to helping claimants who’ve suffered from injury or illness at work.

Who doesn’t need one?

As with all these things, there are exemptions and some businesses don’t need an ERN.

They are:

1. Businesses where all employees are below the PAYE tax threshold (currently £9,440 a year)

2. Businesses registered outside England, Scotland, Wales or Northern Ireland.

3. Businesses without employees.

Not sure that you have an ERN? Or think you’ve lost it?

If you employ someone (or are thinking of doing so) you should be registered with HMRC as an employer.

If you don’t think you have an ERN, it could mean that you’re not registered. Make sure you double-check with HMRC that you are.

And if you can’t find it? Don’t worry. Any correspondence you’ve had from HMRC about PAYE will have your ERN on it. It’s also noted on any P45 or P60 for both past and present employees (if you have copies).

Once you have it, make sure you keep it safe and sound – and easily accessible. You’ll need it regularly throughout the year (and not just to stop us nagging you for it).

 

Image / photographer: numberplates_Jerry Woody | http://www.flickr.com

This entry was posted in Employers' liability, Rules and regulations, Running a business. Bookmark the permalink.

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