If you employ staff in the UK, you almost certainly need Employers' Liability (EL) insurance. It's not just good practice — it's the law. Understanding this requirement can save you from significant penalties and protect both your business and your employees.
Do you have Employers' Liability insurance in place?
Let's check if you're legally compliant.
What is Employers' Liability insurance?
Employers' Liability (EL) insurance protects you if an employee is injured or becomes ill as a result of their work. It covers:
- Compensation claims — if an employee sues for injury or illness caused by their work
- Legal costs — defending claims, even if they're ultimately unsuccessful
- Settlements — amounts awarded by courts or agreed in settlements
This is separate from your general business insurance and is specifically designed to protect against employment-related injury and illness claims.
EL insurance protects both your employees and your business. Employees get compensation if they're harmed; your business avoids potentially devastating legal costs and compensation payments that could bankrupt you.
The legal requirement
The Employers' Liability (Compulsory Insurance) Act 1969 makes it a criminal offence to employ people without adequate EL insurance.
The law says:
"Except as otherwise provided by this Act, every employer carrying on business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorized insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business."
In plain English: if you employ anyone in Great Britain (England, Scotland, Wales), you must have valid EL insurance covering all employees.
When does this apply?
From the moment you employ your first person, even if they're:
- Part-time
- Temporary
- Casual workers
- On a fixed-term contract
- Apprentices or trainees
- Family members (with some exceptions)
- Working remotely or from home
The requirement applies from day one. You cannot wait to see if someone works out or delay getting insurance until they've completed a probation period. If they're an employee, you need insurance immediately.
Minimum cover requirements
The law specifies a minimum level of cover:
£5 million per claim
Your policy must cover at least £5 million for any one claim. This is per incident, not in total.
In practice:
- Most insurers offer £10 million as standard
- Some provide £5 million but this is the absolute minimum
- There's no annual aggregate limit — each claim is covered up to the limit
Why £5 million?
This reflects the potential costs of:
- Serious injuries requiring lifelong care
- Loss of earnings over a working lifetime
- Medical costs and rehabilitation
- Pain and suffering compensation
- Legal fees for complex claims
Catastrophic injuries (spinal injuries, brain damage, multiple trauma) can result in multi-million pound awards.
While £5 million is the legal minimum, many businesses opt for £10 million or more. The additional premium is often modest, and higher cover provides better protection if you face a serious claim.
Who needs Employers' Liability insurance?
You need it if you employ:
- Full-time staff — permanent employees in any role
- Part-time workers — regardless of hours worked
- Temporary staff — seasonal workers, fixed-term contracts
- Casual workers — people employed irregularly
- Apprentices and trainees — even if unpaid or on low wages
- Directors who are employees — company directors with employment contracts
- Workers supplied by agencies — if you have control over them
- Subcontractors — in some cases (if they're effectively employees)
The employment status question
The key test is whether someone is an employee rather than genuinely self-employed. Consider:
- Do you control how, when, and where they work?
- Do you provide equipment and materials?
- Are they integrated into your business?
- Do they have a contract of service (employment) rather than contract for services (self-employed)?
Employee vs Self-Employed Contractor
Employee (You NEED EL Insurance)
- •You control their work methods and hours
- •They work exclusively or mainly for you
- •You provide tools, equipment, premises
- •They receive regular wage or salary
- •Entitled to holiday pay, sick pay
- •Subject to your disciplinary procedures
- •Cannot send a substitute
Self-Employed (They need their own insurance)
- •They control how they work
- •Work for multiple clients
- •Provide own tools and equipment
- •Invoice for work done (not salaried)
- •No employment rights (holiday, sick pay)
- •Run their own business
- •Can send a substitute to do the work
Bottom line: Employment status isn't always clear-cut. HMRC and employment tribunals look at the reality of the relationship, not just what you call it in a contract. If in doubt, treat them as an employee and ensure you have insurance.
Disguised employment
Be careful of "disguised employment" — claiming someone is self-employed when they're actually an employee. This can result in:
- HMRC penalties for unpaid tax and NI
- Employment tribunal claims
- No valid EL insurance (because you didn't declare them as employees)
- Potential prosecution under the EL Act 1969
If you're unsure whether someone is an employee, err on the side of caution. HMRC provides an employment status tool, and employment law specialists can advise. Getting this wrong can be expensive.
Exemptions from the requirement
Very few employers are exempt. The main exceptions are:
1. Family businesses (very limited)
You don't need to insure:
- Close family members (spouse, civil partner, parent, child, sibling, etc.)
- Who are genuinely working in a private family business (not a limited company)
- Where the business is owned and controlled by family members
Important: This exemption does NOT apply if:
- Your business is a limited company (even if family-owned)
- You employ non-family members as well
- The family member is not a close relative (cousins, in-laws generally don't count)
In practice, this exemption is rare. Most family businesses operate as limited companies and therefore must insure all employees, including family.
2. Certain public bodies
Some NHS bodies, local authorities, and police forces are exempt because they're covered by Crown indemnity or similar arrangements.
This exemption doesn't apply to private businesses, charities, or most public-facing organizations.
3. Some offshore and international workers
Employees working entirely outside Great Britain may not need to be covered under UK EL insurance, but this is complex and requires specialist advice.
Family business fined for assuming they were exempt
A husband-and-wife team ran a small café as a limited company. They employed their adult son and daughter, plus two non-family members. They believed the 'family business' exemption meant they didn't need EL insurance.
- ✗Business was a limited company (exemption doesn't apply)
- ✗Employed non-family staff (exemption doesn't apply)
- ✗HSE inspector discovered no EL insurance during routine inspection
- ✗Had been uninsured for 18 months
- ✗No valid excuse for non-compliance
Prosecuted under the Employers' Liability (Compulsory Insurance) Act 1969. Fined £8,000 (calculated as £2,500 for initial offence plus ongoing penalties). Required to obtain insurance immediately. Also received an improvement notice for related health and safety issues.
The family business exemption is very narrow and doesn't apply to limited companies. Even genuine confusion about the rules is not a defence. If you employ anyone, check your legal obligation rather than assuming you're exempt.
Display requirements
Having insurance isn't enough — you must also display the certificate.
What you must do:
- Display your current certificate of insurance at each place of business
- Display it where employees can easily read it (common areas, notice boards)
- Keep it visible at all times
- Update it immediately when you renew your policy
Acceptable alternatives:
If employees work remotely or across multiple sites, you can:
- Provide copies of the certificate to each employee
- Make it available electronically (email, intranet) with clear instructions on how to access it
- Display it at your head office and inform employees where it can be viewed
What the certificate must show:
- Name of the insurer
- Policy number
- Name of the policyholder (your business)
- Period of insurance
- Confirmation that cover meets the Act's requirements
Failing to display the certificate is a separate offence from not having insurance. Even if you have valid insurance, not displaying it can result in penalties. Make this part of your policy renewal process.
Record-keeping requirements
You must keep old insurance certificates for 40 years from the date the policy expired.
Why 40 years?
Some occupational diseases (asbestos-related illnesses, industrial deafness, etc.) take decades to develop. An employee might make a claim 20 or 30 years after exposure.
If you can't prove you had insurance when the exposure occurred, you'll have to pay the claim personally.
Practical steps:
- Store certificates in a safe, fireproof location
- Keep digital copies as backup
- Include them in business records if you sell or close the business
- Transfer records to new owners if you sell
- Inform the Employers' Liability Tracing Office (ELTO) if you're closing down
Many insurers now report policies to the Employers' Liability Tracing Office (ELTO) automatically. This database helps employees trace old policies if they need to claim years later. However, you should still keep your own records as a backup.
Penalties for non-compliance
The consequences of not having EL insurance are serious:
Criminal penalties
Daily fines:
- Up to £2,500 for every day you're uninsured
- Calculated from when you should have had insurance
- Can accumulate quickly if you've been uninsured for months or years
Criminal record:
- Prosecution results in a criminal conviction
- Can affect company directors personally
- May impact future business opportunities
Financial exposure
Without insurance, you're personally liable for:
- Full compensation awarded to injured employees
- All legal costs (yours and theirs)
- Court costs and tribunal fees
A serious injury claim can easily exceed £1 million. Without insurance, this could bankrupt your business and make you personally liable.
HSE enforcement
Health and Safety Executive (HSE) or local authority inspectors can:
- Check your insurance during inspections
- Issue improvement notices
- Prosecute immediately if you're uninsured
- Use insurance status as evidence of poor health and safety culture
Construction company director personally liable after insurance lapse
A small construction company's EL insurance lapsed due to missed payment. The director intended to renew but delayed for cash flow reasons. During this period, an employee fell from scaffolding and suffered life-changing injuries.
- ✗EL insurance had lapsed 6 weeks before the accident
- ✗Director was aware but prioritized other bills
- ✗No insurance in place when employee was injured
- ✗Employee sued for £850,000 compensation
- ✗Company had no insurance to cover claim
Company prosecuted for failing to maintain insurance (fined £15,000). Employee's claim succeeded. Company couldn't pay and entered liquidation. Director was personally pursued for the debt and declared bankrupt. HSE inspector stated: 'This was entirely avoidable. The cost of insurance was around £600 per year.'
EL insurance must be maintained continuously. Even a short gap can be catastrophic. Set up automatic renewal, link payment to your main business account, and treat insurance premiums as a non-negotiable business cost — like rent or wages.
Employers' Liability vs Public Liability insurance
These are often confused but cover different risks:
EL Insurance vs Public Liability Insurance
Employers' Liability
- •Covers injury/illness to your EMPLOYEES
- •Legally required if you employ anyone
- •Minimum £5 million cover
- •Must display certificate
- •Examples: employee falls, repetitive strain injury, occupational disease
- •Protects against employment-related claims
- •Policies must be kept for 40 years
Public Liability
- •Covers injury/damage to THE PUBLIC
- •Not legally required (but often essential)
- •Typically £1-5 million (or more)
- •No display requirement
- •Examples: customer trips, property damage, defective products
- •Protects against third-party claims
- •Standard business record retention
Bottom line: Most businesses need BOTH types of insurance. EL is legally mandatory if you have employees. Public Liability is optional but essential if customers, visitors, or the public could be affected by your work. Many insurers bundle them together in commercial packages.
Examples of what each covers:
Employers' Liability claims:
- Warehouse worker injured by forklift truck
- Office employee develops repetitive strain injury from poor workstation setup
- Chef suffers burns in commercial kitchen
- Factory worker develops hearing loss from machinery noise
- Construction worker falls from height
Public Liability claims:
- Customer trips over loose carpet in your shop
- Your delivery driver damages a client's property
- Product you sold causes injury to consumer
- Visitor to your premises slips on wet floor
- Your business activity damages neighboring property
Self-employed and contractor considerations
If you're self-employed:
You don't need EL insurance for yourself (you can't employ yourself). However:
- You may need Public Liability insurance to protect against third-party claims
- Some contracts require you to have insurance before you can work
- Employers' Liability insurance for the self-employed is a misnomer — if you're genuinely self-employed, you don't need it
When you use contractors:
Genuinely self-employed contractors:
- They should have their own insurance
- Request proof of their Public Liability and Professional Indemnity cover
- Keep copies on file
- Don't assume they're insured — verify
Agency workers:
- If the agency employs them, the agency should have EL insurance
- If you exercise day-to-day control, you may also need to cover them
- Clarify responsibilities in your contract with the agency
Subcontractors you control:
- If they're genuinely self-employed, they insure themselves
- If they work under your direction like an employee, you may need to insure them
- HMRC's IR35 rules on employment status apply
When engaging contractors, always request and verify their insurance certificates. Include a clause in contracts requiring them to maintain adequate insurance. This protects both parties and clarifies responsibilities if something goes wrong.
Special situations
Volunteers
Volunteers are not employees and don't strictly require EL insurance. However:
- Some receive "expenses" that blur the line
- You have a duty of care under health and safety law
- Volunteer insurance is available and recommended for charities and community organizations
- If volunteers could be considered employees (regular hours, controlled work, essential to operations), you may need EL cover
Trustees and directors
- Company directors with service contracts are employees — they need EL cover
- Non-executive directors and charity trustees are usually not employees
- Directors' and Officers' liability insurance is different and covers governance issues, not workplace injury
Apprentices and trainees
- All apprentices are employees and must be covered
- Work experience students may not be employees but are owed a duty of care
- Check with your insurer whether short-term work placements are covered
Home workers
Employees working from home are still employees:
- Your EL insurance should cover them
- Inform your insurer if you have homeworkers
- You still have health and safety duties (DSE assessments, etc.)
How to get Employers' Liability insurance
Finding an insurer
Options:
- Insurance brokers — can compare multiple insurers, provide advice, help with complex needs
- Direct insurers — buy online or by phone, often cheaper for simple businesses
- Industry associations — trade bodies often negotiate group rates for members
- Comparison sites — quick quotes, suitable for straightforward requirements
What insurers need to know:
- Nature of your business (industry, activities)
- Number of employees (full-time, part-time, temporary)
- Payroll/wage bill
- Claims history
- Safety measures in place
Typical costs:
Costs vary hugely by industry and risk:
- Low-risk (office work, retail): £80-£200 per year
- Medium-risk (light manufacturing, hospitality): £200-£800 per year
- High-risk (construction, heavy industry): £800-£5,000+ per year
Factors affecting cost:
- Your industry and claims history
- Number of employees and total wages
- Safety record and measures
- Level of cover (£5m vs £10m)
- Excess (amount you pay per claim)
Shop around but don't just buy the cheapest. Check the policy covers all your employees, includes legal defense costs, and the insurer is authorized by the Financial Conduct Authority (FCA). Cheap policies may have exclusions that leave you exposed.
Maintaining your insurance
Annual renewal
- Set reminders well before renewal date
- Review employee numbers and roles annually
- Inform insurer of significant business changes
- Update payroll figures to ensure adequate cover
During the policy year
Notify your insurer immediately if:
- You hire more employees (may increase premium)
- You change business activities (may affect risk)
- You acquire another business
- You have a claim or potential claim
If you have a claim
- Notify your insurer immediately — delays can invalidate your policy
- Preserve evidence — photos, witness statements, incident reports
- Don't admit liability — let your insurer and lawyer handle negotiations
- Co-operate fully — provide all requested information and documentation
- Keep records — correspondence, medical reports, time off work
Never try to handle a serious injury claim yourself without involving your insurer. Anything you say or write can be used against you. Insurers have specialist claims handlers and lawyers to protect your interests. Notify them immediately, even if the injury seems minor.
Relationship with health and safety duties
Having EL insurance does NOT mean you can ignore health and safety:
- Insurance covers you financially if things go wrong
- Health and safety law requires you to prevent things going wrong
- You can be prosecuted for safety breaches even if you're insured
- Poor safety record will increase insurance premiums or make you uninsurable
Insurance and the law work together:
| Health and Safety Law | Employers' Liability Insurance |
|---|---|
| Prevents harm | Pays compensation if harm occurs |
| Legal duty to manage risks | Legal duty to insure against claims |
| Breach = prosecution, fines, imprisonment | No insurance = prosecution, fines |
| Requires risk assessments, policies, training | Requires disclosure of risks, claims history |
| HSE enforcement | FCA regulation |
Think of EL insurance as a safety net, not a substitute for safety. Your primary duty is to prevent injury and illness through proper risk management. Insurance protects you if, despite your best efforts, something goes wrong.
Frequently asked questions
It depends. If you operate as a limited company, YES — the family exemption doesn't apply to companies. If you're a sole trader or partnership employing only close family (spouse, children, parents, siblings), you may be exempt. However, if you also employ anyone outside this close family group, you must insure everyone, including the family members.
Up to £2,500 per day that you're uninsured, plus a criminal record. This is calculated from when you should have had insurance, so if you've been uninsured for months, fines can be substantial. You're also personally liable for any employee injury claims, which could bankrupt your business.
No. £5 million per claim is the legal minimum. Policies offering less than this don't comply with the Act. Most insurers offer £10 million as standard, and the premium difference is usually small. Never accept a policy below the legal minimum.
Yes. Your policy is based on employee numbers and wages. Taking on additional staff, even temporarily, changes your risk profile. Many policies cover small fluctuations, but significant changes must be reported. Check your policy terms and notify your insurer or broker.
Workers' compensation is used in the US and some other countries — it's a no-fault system where injured workers receive automatic benefits. In the UK, we use Employers' Liability insurance, which covers you if an employee sues you for negligence. The employee must prove you were at fault, but the insurance covers the claim and legal costs.
Yes, if an employee develops a mental health condition (stress, anxiety, depression) due to their work and can prove your negligence contributed to it. This is an emerging area of claims. Good health and safety practice includes managing psychosocial risks like excessive workload, bullying, and work-related stress.
Yes, most commercial insurance packages bundle EL with Public Liability and sometimes other covers. This is often cheaper than buying policies separately. Just ensure the EL element meets the legal minimum (£5 million) and covers all your employees.
This is why you must keep certificates for 40 years and why insurers report to the Employers' Liability Tracing Office (ELTO). If you close, keep all insurance records or transfer them to a successor. If a claim arises, the old insurer should still cover it if the injury occurred during the policy period.
If the umbrella company is the legal employer, they should have EL insurance. However, if you exercise day-to-day control over the workers, you may have joint liability. Clarify in your contract who employs them and ensure someone has valid insurance covering the arrangement.
Normally the company is liable, not directors personally (limited liability protection). However, directors can be prosecuted personally for failure to obtain insurance. And if the company can't pay a claim and goes insolvent, creditors (including injured employees) may pursue directors in certain circumstances, especially if there was wrongful trading.
Next steps
To ensure you're compliant with Employers' Liability insurance requirements:
1. Check your current insurance
- Locate your certificate of insurance
- Verify it covers at least £5 million per claim
- Confirm all employees are covered
- Check the renewal date and set a reminder
2. Display your certificate
- Post it prominently where employees can see it
- Or provide copies/electronic access to all employees
- Update it immediately when renewed
3. Keep records
- File old certificates safely
- Plan for 40-year retention
- Consider digital backups and cloud storage
4. Review when things change
- Hiring new staff
- Changing business activities
- Acquiring other businesses
- Taking on different types of work
5. Link insurance to your health and safety management
- Inform your insurer of your safety measures (may reduce premiums)
- Report incidents that could become claims
- Keep claims history and learn from incidents
Unsure if your current insurance meets legal requirements? An insurance broker specializing in commercial cover can review your policy, identify gaps, and ensure you're fully protected at a competitive price.
Related articles:
- Health and Safety at Work Act 1974 Explained
- Appointing a Competent Person
- Employer Health and Safety Duties
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