Employers' liability insurance protects you if you're sued by an employee for a work-related injury, illness or death that happened because of work. If one of your employees is injured or falls ill because of their employment, they may try to claim compensation from you—employers' liability insurance protects you financially against these claims.
Employers' liability insurance (also called "EL" insurance) is required by law in most cases if you have someone working for you. It's a good idea, anyway, because the HSE statistics estimate that over 1 million workers in Great Britain are injured or made ill by their work each year. Below we explain what is covered and who needs to buy employers' liability insurance—and who doesn't.
- What does Employers' Liability Insurance cover?
- Do I Need Employers' Liability Insurance?
- Common Exclusions
- Where to get help if you're not sure
- Where can I get employers' liability insurance quotes?
What does Employers' Liability Insurance cover?
Employers' liability insurance covers compensation payments to your current and former employees if they are injured at work or become ill due to their work for your business. In addition, employers' liability insurance would cover legal fees associated with defending an employee liability claim.
- Legal fees to defend a claim from an employee for work-related injury or illness
- Compensation payments to the employee
Having employers' liability insurance in place does not mean you can forgo health and safety in the workplace. Your business must still carry out risk assessments, take measure to protect your employees and report any incidents that do occur. If your insurer thinks that you haven't met your responsibilities to protect the health and safety of your employees, you insurer can sue you for compensation.
If you do not have employers' liability insurance when you are required to have it, you can be fined £2,500 per day until you have cover in place. In addition, Health and Safety Executive (HSE) inspectors can ask to see proof (i.e., your certificate of insurance) and if you don't supply it, you could be fined £1,000.
Do I Need Employers' Liability Insurance?
Employers’ liability insurance is generally compulsory if anyone is working for your business—which is defined as anyone you hire under an apprenticeship or contract of service. The "contract of service" terminology is a bit ambiguous, unfortunately. Essentially it's the nature of your working relationship with an employee and how much control you have over the work they do that determines whether or not you need employers' liability insurance. It's also one of the most common types of business liability insurance.
(There is an exemption for close family members working in a family business as discussed in the legislation here, but this exemption does not applies to family business incorporated as limited companies as discussed in the HSE guide to employers about the Employers’ Liability (Compulsory Insurance) Act 1969.)
Many people wonder if a worker's tax status makes a difference—but it's irrelevant. And it doesn't matter whether you refer to someone as an "employee" or "self employed".
To help clear up the definition of "contract of service" let's look at some examples of situations that may or may not require employers' liability insurance, which we found at the Health and Safety Executive (HSE):
Examples of when you probably need employers' liability insurance
- You deduct national insurance and income tax from the money you pay someone who works for you;
- You control where and when someone works and how they do it;
- You supply the required materials and equipment ;
- You have a right to any profit your workers make (even if you choose to share it with them through commission, performance pay or shares in the company);
- You require that a worker deliver the service (and not allow them to employ a substitute if they can't work); or
- A worker is treated in the same way as other employees (e.g., they do the same work under the same conditions as other employees)
Examples of when you probably DON'T need employers' liability insurance
- You do not deduct national insurance and income tax from the money you pay someone who works for you. However, some workers may be classed as "self employed" for tax purposes, but classed as an "employee" for other reasons, in which case you may still need employers’ liability insurance.
- A worker does not work exclusively for you (e.g., they work as an independent contractor)
- A worker supplies most of the required materials and equipment they need for a job
- A worker is clearly in business for their own personal benefit
- A worker can hire someone else to do the work if they're unable to do so
- A worker is a close family member and you operate as a sole trader or partnership
- A worker is based abroad (for example, if they are on secondment); however you do need cover for employees based in Great Britain for 14 continuous days (or 7 days on an offshore installation)
If an independent contractor does not work exclusively for you but is employed by other organisations as well, you may not need employers' liability insurance. However, you should ask if your contractor has Employers’ Liability Compulsory Insurance for their employees, if required.
It depends. You do need employers' liability insurance for any "labour only" subcontractors. "Labour only" subcontractors work hours set by you, under your direction, and using materials and tools provided by you.
On the other hand, you do not need employers' liability insurance for any "bona fide" subcontractors. A "bona fide" subcontractor sets their own hours, submits invoices, works without supervision, and uses their own tools, materials, etc. However, make sure that any bona fide subcontractor working for you has public liability insurance and employers' liability insurance for their employers, as required.
According to the HSE, insurers will usually cover volunteers under an existing employers' liability policy. This also applies to unpaid students, people taking part in a youth or adult training programme (not employed by you) and school students on work experience programmes.
While you may not need to notify your insurer if volunteers work for you, it is a good idea to confirm with your insurer that they are in fact covered. And you should notify your insurer if someone in this situation will be working for an extended time or does work outside of your company's usual business. And if you don't have a policy in place yet, then you will need to get one.
No, you generally do not need employers' liability for a cleaner—if your cleaner works for more than one person. However, if your cleaner works only for you then you probably need to take out employers' liability cover. The same applies to gardeners.
If your nanny works only for you then you may be required to take out employers' liability insurance; however if your nanny or childminder works for multiple families then you may not need to.
Family business are exempt from the Employers’ Liability (Compulsory Insurance) Act 1969. So if all of your employees are closely related to you (e.g., husband, wife, civil partner, father, mother, grandfather, grandmother, stepfather, stepmother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother or half-sister) then you don't need employers' liability insurance.
However, this exemption only applies if your business is structured as a partnership or you're a sole trader. Businesses incorporated as limited company DO require employers' liability insurance, even if all employees are close family members.
If you have anyone working for your LLC who meets certain requirements, then yes, you need employers' liability insurance. Of note: limited companies must even get employers' liability for employees who are family members.
Yes, you still need to have employers' liability insurance for a temporary worker—assuming they meet any of the conditions that would trigger needing cover for a permanent worker.
The only time you don't need employers' liability as a director is if you are the sole director and sole employee of the company and you hold at least 50% of the shares in the company. If the company has more than one director, any employees other than you and/or you own less than 50% then you do need employers' liability insurance as a director.
You do not need employers' liability insurance for a limited company if you are the sole director and the sole employee of the company and you hold at least 50% of the shares in the company. Otherwise, if any one of those conditions is false, then you do need employers' liability insurance for a limited company.
It depends. If a freelancer is truly a freelancer—for example they work for multiple clients, control their own time and work, use their own materials, etc.—then you probably don't need employers' liability insurance. However if, for example, a freelancer works only for you, uses your equipment, has their schedule and work set by you and/or is treated the same as your other employees then you probably do need employers' liability insurance.
It depends. If you already have existing employers' liability insurance coverage in place you probably do not need extra coverage for people participating in work experience programmes with you—but check with your insurer to be sure. However if you don't have a policy in place yet then, yes, you should buy employers' liability insurance for work experience.
It depends. If your self-employed staff meet certain conditions (e.g., they only work for you or they use your equipment or you control their work, etc.) then you probably do need employers' liability insurance for them.
Businesses Excluded from Needing Employers' Liability Cover
While employers' liability is generally compulsory if anyone is working for your business, there are some employers who are exempt from the law altogether:
- Family businesses: You don't need employers' liability cover for family members who work for you, so long as they are "close" (e.g., husband, wife, civil partner, father, mother, grandfather, grandmother, stepfather, stepmother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother or half-sister) and you operate as a sole trader or a partnership. A limited company is required to have employers' liability insurance even for close family members.
- Solo businesses: Companies don't need employers' liability insurance if they only employ their owner, and that owner employee owns at least 50% of the issued share capital in the company.
- Public organisations typically don't need employers' liability cover. These include government departments and agencies, local authorities, police authorities and nationalised industries.
- Health service bodies such as NHS trusts, health authorities, primary care trusts and Scottish health boards don't need employers' liability insurance.
- Other organisations which are financed through public funds don't need cover. Examples include passenger transport executives and magistrates’ courts committees.
There are many common exclusions to employers' liability insurance coverage that you should be aware of. They include but are not limited to the following:
- Timely notification: If you do not notify your insurer within a certain time frame (e.g., 7 days) of a claim or potential claim, you may not be covered.
- Motor vehicle accidents: Employee injuries and illness due to motor vehicle accidents that occur while working for you may be excluded from cover by your employers' liability policy; instead these would be covered separately by your commercial vehicle insurance.
- Deliberate acts: Deliberate or reckless acts are usually excluded
- Admission of liability: If you admit you are liable, then an insurer can reduce the payments they make.
- Unsanctioned offers: If you make an offer without your insurer's prior written consent, then an insurer can reduce the payments they make.
The Employers' Liability (Compulsory Insurance) Regulations 1998 (read the regulation here) specifies a minimum of £5 million of employers' liability coverage, which is the limit of insurance on most policies. Businesses engaged in very risky work might need a higher limit, especially if they have a large number of employees. Discuss your needs with a specialist insurance provider if you have questions about the level of cover your business needs.
Yes, employers' liability is compulsory in most cases if you have an employee working for you. In fact, The Employers’ Liability (Compulsory Insurance) Act 1969 specifies that firms have a minimum amount of employers' liability cover (£5 million minimum). If you're unsure whether or not you need employers' liability, read our examples or get help.
No. Public liability insurance is different from employer's liability insurance. Public liability protects you financially against claims made by members of the public or other businesses, but not for claims by employees. On the other hand, employers' liability protects you against claims made by current or former employees for injuries or illnesses sustained due to work. Read about the differences between coverage and claims in our article Employers' Liability vs Public Liability Insurance Claims Explained.
No, employers' liability is not the same a professional indemnity insurance. Employers' liability insurance covers claims against you by an employee for injuries or illnesses sustained due to work. Professional indemnity insurance protects you from negligence claims from your clients for work they deem to be inadequate.
Employers' liability insurance is not a "benefit" for employees; it will cover costs (legal fees and compensation payouts to employees) of compensation claims made by employees, in the event you are sued by an employee who was injured or became ill due to their work for you.
Employers' liability insurance ranges from £61 up to hundreds or thousands of pounds a year. See how costs vary based on factors like the number of employees, the industry you're in and your business structure in our article on the Average Cost of Employers' Liability Insurance.
Sometimes it's not clear whether or not you need employers' liability insurance. If you are uncertain whether someone is an employee or not, you can consult a solicitor or go to a legal centre or a Citizens’ Advice Bureau. You an also read more guidance about employers' liability on the HSE website. You can also find more information on the Gov.uk website here.
Please note that the guidance on the HSE site, or any guidance discussed here, has no formal legal status; only the courts can authoritatively interpret the law.
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