What is an ERN & Why is it Essential for your Business?
With businesses aspiring to grow and develop, the need for increased staff numbers can become a priority. Employer’s Liability insurance is a key requirement. As a legal requirement, it is important to understand your responsibilities as a policyholder. One of which is the ‘ERN’ submission to the insurer.
What is an ERN?
An ERN is an Employer Reference Number, also referred to as an Employer PAYE reference number. You receive your ERN number when you identify yourself as an employer to the HMRC.
It is a unique set of letters and numbers which identifies your company apart from other businesses as it is tailored to you.
The number is created by the use of a 3-digit HMRC office number to begin the sequence followed by a combination of between 1 and 10 letters and numbers, which will usually look something like 678/DEN963 or 246/XYZ0246.
Did you know?
An ERN can often be mistaken for a HMRC’s Accounts Office Reference. This is a number used by an employer when making payments to HMRC.
The main reason the numbers can be mistaken is due to the fact they are very similar, both beginning with the same 3 HMRC digits and often appearing together on documents, for example on payslips or a P45.
Why is an ERN important in Insurance?
An ERN is of vital importance when applying for Employer’s Liability insurance (EL) and alongside EL has become a legal requirement. The main reason behind this is the support it provides when you’re making a claim.
The main issue with claims is that they can be made years after the event has happened. With this in mind it is vital for the Employer’s Liability Tracing Office (ELTO) to locate all previous occupations for the client.
To keep this as efficient and effective as possible and to avoid taking time running through paperwork, the ERNs are used to find both the employer and the relevant insurer as the number is assigned to them specifically.
Considering all the information above the FCA (Financial Conduct Authority) enforced regulations which explained: Employers’ Liability policy data was required from 1 April 2011 and additional information, which includes ERN, and subsidiary information would also be required from 1 April 2012.
How do you know if you are eligible for an ERN?
If you begin a business where you employ people who are registered in the UK and are above the PAYE threshold, then you will most certainly need to obtain an ERN number.
Outside of insurance, it is also beneficial if one of your employees should want to apply for tax credits, student loans or a P45.
If you don’t happen to have an ERN when required, you could also run the risk of rejection for your end of year tax returns.
However, there are some exemptions to requiring an ERN number. They are highlighted below:
- Payment for all employees is below the current Lower Earnings Limit (£123 per week/£533 per month 2022-2023) and they have no other occupation, and not in receipt of a state or occupational pension or other benefits.
- Have no tax presence in the UK, as are registered in the Isle of Man or Channel Islands.
- Employer has no employees.
- Employees are paid as self-employed or via an agency
- Unpaid volunteers
Did you know that if you are a Director of a Limited Company and have no employees, you are still required to register for an ERN number? The reason behind this is because you are classed as an employee of the Limited Company.
What if I have multiple ERN’s?
In the case of you being a larger corporate company and having multiple ERN’s. Then we, as the brokers should provide details of all of them to the insurers.
In the event of an electronic trading platform being used, we would highlight the ‘most relevant’ ERN. This means the ERN which covers the majority of the company’s employees. This is because the platform only allows one ERN to be captured.
How can I obtain an ERN if I don’t have one?
As mentioned previously, you receive your ERN when you register as an employer with HMRC.
In the case you haven’t registered with HMRC to receive your ERN number here are the steps of what you need to do:
- Register before the first payday – as it can take up to five working days to get your PAYE reference number. It is advised to register as soon as possible. (However, note that you cannot register more than two months before you begin to pay employees).
- Register as an employer at gov.uk – there are two sections for businesses:
- Limited companies with 1-9 directors
- All other types of businesses
- Send a late full payment submission to HMRC – please note this is only if you need to pay an employee before getting an ERN.
We hope you have found this article beneficial, and have gained further insight into ERNs. If you feel you currently don’t have one in place and require one, please follow the link to register with HMRC https://www.gov.uk/register-employer or if you would like further guidance please contact us on 01743 770500.