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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.
- What does Employers' Liability Insurance cover?
- Do I need Employers' Liability Insurance?
- Common exclusions
- How much does Employers' Liability Insurance cost?
- Where to get help if you're not sure
- Where can I get employers' liability insurance quotes?
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, how much employer's liability insurance costs and who needs to buy employers' liability insurance—and who doesn't.
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 measures 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, your 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 and retroactively fined £2,500 per day that you didn’t have it in place. So if you’ve not had it for a year you could be fined £912,500, even if it’s only discovered by authorities a month before the year ends. 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.
Employers' Liability Insurance Claims Examples
A company building commercial greenhouses hires freelance labourers in order to assist with disposal of old glass panels from the greenhouses previously occupying the construction site. The labourers are given health and safety training, and provided with safety equipment for their work. One of the labourers does not wear their provided gloves and severely lacerates their hands and arms whilst moving a large piece of glass. Following this, they bring an employer’s liability claim against the business owner, alleging that they were not properly trained in health and safety. Due to an administrative oversight there is no signed document from the labourer confirming that he has completed and understood his health and safety obligations whilst working. As a result, the labourers claim was deemed valid, with the employer held accountable for over £110,000. The claim drags on for several months more than necessary as the employer had not declared his use of freelance labour when obtaining his insurance, but eventually insurers pay the claim. At renewal the premium for his policy triples and the market largely closes to him due to the circumstances of the claim and issues over non-disclosure.
A retired factory worker finds out that he has a life limiting condition which was caused by exposure to wood treatment chemicals over a decade earlier. He seeks legal advice and finds that several of his colleagues have also been diagnosed with the same condition. Together they form an action group and hire a solicitor’s firm to represent all members of the group in claiming against the factory owner. The claim is upheld in court and the factory owner is required to pay for all legal fees for both parties, in addition to compensatory payments for each affected individual and any coming forward with the same condition in future. Their Employers Liability policy pays for this.
An employee working in an office experiences weakness, pain and stiffness in their wrists, affecting their quality of life in and out of work. After visiting their doctor they are diagnosed with repetitive strain injury (RSI) which is deemed to be a result of long hours spent typing with improper wrist support and poor posture. They make a claim against their employer for not providing them with the appropriate safety training and equipment, which is upheld in court and the employee is paid £13,500 in compensation. The legal costs of defending and pursuing this claim are over £20,000, far greater than the compensation payment. Employers Liability policies would pay those costs whether the claim had succeeded or not.
A roofing contractor falls from a first story roof and breaks his back, causing permanent paralysis of his legs. Solicitors claim over £8,000,000 (eight million pounds) against his employer not only for the physical and mental trauma associated with the accident, but for loss of future earnings and future care costs. The claim is for poor training and upheld, meaning the roofing company’s Employers Liability policy covers this compensation and legal fees. The employing business is investigated by the HSE (Health and Safety Executive) and found to have been in breach of the Health and Safety at Work act 1974. The company directors are held personally responsible and disqualified as directors, with the HSE taking action and prosecuting the directors under criminal law. If they had had a Directors and Officers policy they may have stood a much greater chance of successfully defending themselves and their personal assets following the accident.
Do I Need Employers' Liability Insurance?
Employers’ liability insurance is generally compulsory if anyone is working for a business—which is defined as anyone hired 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 apply to family businesses 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. The following examples were sourced from 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
- A worker owns their own business and works for many clients (e.g. they are a limited company, sole trader or freelancer)
- A worker supplies most of the required materials and equipment they need for a job
- 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)
- A worker is an employee in another company with its own EL policy
- A worker is a ‘bona-fide’ subcontractor
Ultimately a business owner is responsible for determining if they need EL or not. If in any doubt you can call any insurance company or broker to clarify OR you can contact the HSE (0300 790 6787).
According to the HSE, if an independent contractor does not work exclusively for one business but is employed by other organisations as well, then employers' liability insurance may not be required. It would be important to find out if the contractor has employers’ liability compulsory insurance for their employees, if required.
It depends. According to the HSE, a firm would 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, employers' liability insurance would typically not be required 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 employees, as required.
According to the HSE, insurers will usually cover volunteers under your 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 the organisation does not yet have a policy in place yet, one would probably be required.
Employers' liability is typically not required for a cleaner who works for multiple families. However, if a cleaner works only for one family then that family probably needs to take out employers' liability cover. The same applies to gardeners.
If a nanny works only for one family then employers' liability insurance might be required; however if a nanny or childminder works for multiple families then it would typically not be required.
Family business are exempt from the Employers’ Liability (Compulsory Insurance) Act 1969. When all employees are closely related to the owner (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 employers' liability insurance would probably not be required, depending on the business structure.
This exemption only applies if a business is structured as a partnership or a sole trader. Businesses incorporated as limited company DO require employers' liability insurance, even if all employees are close family members.
Employers' liability insurance would be needed for a temporary worker—assuming they meet any of the conditions that would trigger needing cover for a permanent worker.
The only time someone doesn't need employers' liability as a director is if they are the sole director and sole employee of the company and they hold at least 50% of the shares in the company. According to the rules, if the company has more than one director, any other employees and/or the director owns less than 50% then the director would need employers' liability insurance.
Employers' liability insurance for a limited company would not be required if there is a sole director who is the sole employee of the company and holds at least 50% of the shares in the company. Otherwise, if any one of those conditions is false, then employers' liability insurance for a limited company is required. For example, if anyone is working for your limited company 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.
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 employers' liability insurance is probably not required . 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 the rules would probably be triggered requiring employers' liability insurance.
It depends. If existing employers' liability insurance coverage in already place then extra coverage may not be required for people participating in work experience programmes—but this should be confirmed with the insurer to be sure. However if there is no employers' liability insurance policy in place yet then employers' liability insurance would be needed to cover work experience.
It depends. If 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 this probably triggers needing 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.
If your EL policy comes with exclusions that seem unfair or more punitive, query this with your insurer and get the opinion of other insurers and brokers. EL is supposed to protect your employees so if there is a gap in cover which excludes claims which are a real possibility, you should never buy the policy without a second expert opinion.
Employers' Liability Insurance Costs
Employers' liability insurance costs range from around £60 up to hundreds of pounds per employee per year. EL rates depend on factors like the number of employees and the riskiness of the work your employees do. For instance, EL for office workers costs less than for someone carrying out physical tasks. Plus, the more employees you have, the higher your employers' liability insurance premium. However, each additional employee typically costs less to insure compared to previous employees you've added to your cover.
Get an idea of costs in the table and chart below, and for more information read our in-depth study on the average cost of employers' liability insurance.
|Average Cost of Employers' Liability Insurance in the UK|
|1 office worker||£61|
More Employers' Liability FAQs
The Employers' Liability (Compulsory Insurance) Regulations 1998 (read the regulation here) specifies a minimum of £5 million of employers' liability coverage. However, most insurers offer £10 million as the minimum these days. You can get more, up to £15 and £20 million, and even more in some special cases.
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. Employers' liability insurance is one of the many requirements you must abide by when hiring someone.
No. Public liability insurance protects you financially against claims made by members of the public or other businesses, but not for claims made by current or former employees for injuries or illnesses sustained due to work.
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 and your business 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.
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. It is ultimately your responsibility to determine if you need Employers’ Liability cover or not.
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.
Also, be aware that your insurer should update the Employers liability register to reflect that your business is covered.
Where Can I Get Employers' Liability Insurance Quotes?
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