Employers liability insurance is one of the few types of business insurance that's a legal requirement in the UK. If you employ anyone, even one person, you almost certainly need it. The penalties for not having cover are severe, and the consequences of being uninsured when an employee makes a claim could destroy your business.
This guide explains exactly what employers liability insurance is, who needs it, and how to stay compliant.
Legal requirements at a glance:
- Employers liability insurance is compulsory for most employers under the Employers' Liability (Compulsory Insurance) Act 1969
- Minimum cover: £5 million (most policies provide £10 million)
- Fine for not being insured: up to £2,500 per day
- Fine for not displaying certificate: £1,000
- You must keep certificates for 40 years
What is employers liability insurance?
Employers liability insurance (often called EL insurance) covers you against claims from employees who are injured or become ill as a result of their work for you. If an employee sues you for compensation, your insurance pays for:
- Legal defence costs
- Compensation awarded to the employee
- Medical expenses
- Court costs
Without insurance, you would have to pay these costs yourself. A serious injury claim can easily run into hundreds of thousands of pounds, potentially millions for life-changing injuries or fatal accidents.
What types of claims does it cover?
Employers liability insurance covers claims arising from:
- Physical injuries - slips, trips, falls, machinery accidents, vehicle incidents
- Occupational illnesses - conditions caused or worsened by work, such as:
- Repetitive strain injury (RSI)
- Work-related stress and mental health conditions
- Hearing loss from noise exposure
- Respiratory conditions from dust or fumes
- Skin conditions from chemicals
- Asbestos-related diseases
- Musculoskeletal disorders from manual handling
- Historical exposure - illnesses that develop years after exposure, such as mesothelioma
The policy covers claims from current employees, former employees (for incidents that occurred during their employment), and in some cases, contractors working under your direction.
Who must have employers liability insurance?
Under the Employers' Liability (Compulsory Insurance) Act 1969, employers liability insurance is compulsory for almost all employers in Great Britain. You need it if you employ:
- Full-time employees - permanent staff on your payroll
- Part-time employees - even if they only work a few hours per week
- Temporary workers - seasonal staff, casual workers, those on fixed-term contracts
- Apprentices and trainees - including government-funded apprentices
- Volunteers - if they have a contract of employment (written or implied)
- Family members - if they're employed by your business (with limited exceptions)
- Labour-only subcontractors - if they work exclusively or mainly for you and you control how they do their work
The key test is the employment relationship: if you have any control over how someone does their work, they're likely an employee for insurance purposes, regardless of what you call them.
The "one employee" rule
There is no minimum threshold. If you employ just one person, even for a few hours per week, you need employers liability insurance. Many small business owners fall foul of this because they think having "just" a part-time helper doesn't count. It does.
Family members as employees
If family members work for you, they're generally treated like any other employee, meaning you need employers liability insurance. However, there is a limited exemption:
You're exempt if all your employees are close family members (husband, wife, civil partner, parent, child, sibling) AND they all live with you in your home.
If even one employee doesn't meet both criteria (close family AND living with you), you need insurance for everyone.
Who is exempt from employers liability insurance?
Very few employers are exempt. The exemptions are:
Sole traders and partnerships with no employees
If you're genuinely self-employed with no employees, you don't need employers liability insurance. However, the moment you take on any employee, the requirement kicks in.
Family-only businesses (limited exemption)
As noted above, businesses where all employees are close family members who live with the employer are exempt. This exemption is narrow and easily lost.
Certain public organisations
Some public bodies and nationalised industries are exempt because they're backed by public funds. This includes:
- Health service bodies
- Local authorities
- Police authorities
- Nationalised industries (those still in public ownership)
One-person limited companies
If you're the sole director and only employee of your own limited company, and you own 50% or more of the share capital, you're technically exempt. However, many businesses in this situation still get cover because:
- Taking on any additional employee immediately triggers the requirement
- Some clients and contracts require proof of employers liability insurance
- The exemption is easily lost if circumstances change
The legal requirements in detail
Minimum cover level
The law requires a minimum of £5 million cover for any one claim or occurrence. However, most insurers provide £10 million as standard, and this is what most businesses have.
For higher-risk industries or larger employers, consider whether £5 million or even £10 million is adequate. A serious multiple-injury incident or a claim involving historic asbestos exposure could exceed these limits.
Your insurance must be with an authorised insurer
Your policy must be with an insurer authorised by the Prudential Regulation Authority (PRA) or the Financial Conduct Authority (FCA), or an insurer permitted under European law (though this has evolved post-Brexit).
Check that your insurer is on the Financial Services Register. Policies from unauthorised insurers don't satisfy the legal requirement.
Displaying your certificate
You must display your current employers liability insurance certificate where employees can easily read it. This can be:
- A physical certificate displayed in the workplace
- An electronic copy that employees can access (many businesses now use their intranet or shared drives)
If you have multiple sites, each site needs access to the certificate.
Keeping old certificates
You must keep copies of all employers liability insurance certificates for 40 years. This is because occupational diseases can take decades to develop. An employee exposed to asbestos in 1985 might not develop mesothelioma until 2025, and they could claim against the policy that was in force when they were exposed.
Keep certificates securely, whether physical or digital. If you can't produce evidence of historic cover, you may face difficulties if a historic claim arises.
Penalties for non-compliance
The penalties for not having employers liability insurance are significant:
| Offence | Maximum penalty |
|---|---|
| Not having insurance when required | £2,500 per day you're uninsured |
| Not displaying certificate | £1,000 |
| Failing to produce certificate for inspection | £1,000 |
These penalties are enforced by the Health and Safety Executive (HSE). While prosecutions aren't common, the HSE does check during workplace inspections and can prosecute.
More importantly, being uninsured when an employee makes a claim leaves you personally liable for potentially unlimited compensation. This could bankrupt your business and, depending on your business structure, affect your personal assets.
What employers liability insurance doesn't cover
Understanding the exclusions helps you get appropriate cover:
Claims from members of the public
Employers liability covers employees only. Claims from customers, visitors, suppliers, or members of the public are covered by public liability insurance, which is separate (though often sold together).
Motor accidents covered by motor insurance
If an employee is injured in a road traffic accident involving company vehicles, the motor insurance policy typically handles the claim, not employers liability insurance.
Deliberate acts
If you deliberately injure an employee, your insurance won't cover you. This would be a criminal matter anyway.
Contractual liabilities you've voluntarily assumed
If you've contractually agreed to accept liability beyond what the law requires, those additional liabilities might not be covered.
Fines and penalties
Insurance doesn't cover fines imposed by courts or regulators.
Employers liability vs public liability insurance
These are frequently confused but cover different things:
| Employers liability | Public liability | |
|---|---|---|
| Covers claims from | Employees | Members of the public, customers, suppliers, visitors |
| Legal requirement | Yes, compulsory for most employers | No, but often contractually required |
| Minimum cover | £5 million (most have £10 million) | No minimum, but £1-5 million typical |
| Typical claims | Workplace injuries, occupational illness | Slip and trip injuries to visitors, damage to property |
Most businesses need both. If a customer slips in your shop, that's public liability. If an employee slips, that's employers liability.
Many insurers offer combined policies that include both covers, which is often more convenient and cost-effective than separate policies.
How much does employers liability insurance cost?
Cost varies significantly based on:
Industry and occupation
Higher-risk industries pay more. A construction company will pay far more than an office-based business. Insurers assess the likelihood and typical severity of claims in your sector.
Number of employees
More employees generally means higher premiums, though it's not simply proportional. Insurers consider total payroll and the mix of roles.
Claims history
A history of claims increases premiums. Conversely, claims-free years may earn no-claims discounts.
Turnover and payroll
Larger businesses typically pay more because there's more exposure.
Control measures and safety record
Demonstrating good health and safety management can reduce premiums. Insurers may ask about your risk assessments, training programmes, and safety procedures.
Typical costs: Small, low-risk businesses might pay a few hundred pounds per year. Higher-risk businesses or those with more employees can pay thousands. The only way to know your cost is to get quotes.
How to get employers liability insurance
Standalone vs combined policies
You can buy employers liability insurance:
- Standalone - just the EL cover on its own
- Combined - bundled with public liability and sometimes other covers
- As part of a business package - many "business insurance" packages include EL, PL, and other covers
Combined or package policies are often more convenient and better value, but compare the cover levels and exclusions carefully.
Where to buy
- Direct from insurers - many insurers sell direct online or by phone
- Through an insurance broker - useful if your business is complex or high-risk
- Through trade associations - many trade bodies offer member schemes with competitive rates
- Comparison websites - can help for straightforward businesses
What you'll need to provide
When getting quotes, you'll typically need:
- Business type and activities
- Number of employees and their roles
- Annual payroll or turnover
- Claims history (usually last 5 years)
- Details of any hazardous activities
- Information about your health and safety arrangements
What to do if you need to make a claim
If an employee is injured or becomes ill and might make a claim:
- Report it promptly - notify your insurer as soon as you become aware of a potential claim, even if the employee hasn't formally claimed yet
- Don't admit liability - let your insurer and their legal team handle liability questions
- Gather evidence - preserve any relevant documents, photos, witness statements, and records
- Cooperate with your insurer - they'll guide you through the process and appoint solicitors if needed
- Keep the employee informed - maintain communication, but avoid discussing liability
Most policies require prompt notification of potential claims. Late notification can give insurers grounds to reduce or refuse cover.
Checking your policy is adequate
Review your employers liability insurance regularly to ensure:
- Cover level is sufficient - £5 million is the legal minimum, but is it enough for your risk profile?
- All employees are covered - including temps, apprentices, and anyone you control
- Activities are accurately described - if your business changes, tell your insurer
- Policy is with an authorised insurer - check they're FCA/PRA authorised
- Certificate is accessible - displayed or available electronically
If you've grown, changed activities, or taken on higher-risk work, your existing cover may no longer be appropriate.
Frequently asked questions
It depends. If volunteers have a contract of employment (even implied) and you control how they work, they may be treated as employees and you'd need cover. Genuine volunteers with no employment relationship may not require cover, but many organisations insure them anyway for protection. Check with your insurer about your specific arrangements.
If they're genuinely self-employed with their own insurance, usually not. However, if you control how they work (not just what they do, but how they do it), they may legally be employees for insurance purposes. Labour-only subcontractors who work mainly for you are often considered employees. If in doubt, either get cover or get legal advice.
Yes. Directors and officers can be personally liable for the fine of up to £2,500 per day for not having insurance. If an employee is injured and the company can't pay compensation due to lack of insurance, they may pursue directors personally in some circumstances. Limited company status doesn't fully protect you from this risk.
Generally, employees have 3 years from the date of injury to make a personal injury claim. However, for occupational diseases, the 3 years runs from when they became aware (or should reasonably have become aware) that their condition was work-related. This is why you must keep certificates for 40 years - claims can arise decades after exposure.
Summary: your employers liability checklist
Ensure you're compliant:
- Confirm you need insurance - if you have any employees, you almost certainly do
- Get adequate cover - minimum £5 million, but £10 million is standard and recommended
- Use an authorised insurer - check they're on the Financial Services Register
- Display your certificate - physically or make it electronically accessible
- Keep certificates for 40 years - store them securely for potential historic claims
- Review annually - check cover is still appropriate for your business
- Report incidents promptly - notify your insurer of any potential claims immediately
Use our Responsibility Checker to understand all your employer obligations, not just insurance.
Not sure if your insurance arrangements are adequate? An insurance broker can review your business activities, employee arrangements, and risk profile to ensure you have appropriate cover in place.
Related: Small Business Health and Safety Guide | Sole Trader Health and Safety | Responsibility Checker Tool