Employers' liability insurance
- As a legal requirement for anyone with staff, make sure you get the right cover for your business.
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What is employers’ liability insurance?
As an employer, you have responsibilities to protect your employees, which includes a legal requirement to have employers’ liability insurance.
It could cover you if one of your employees becomes ill or is injured as a result of working for you. If you employ one or more people or are a limited company with multiple directors, it's a legal requirement to have cover. If you're not a limited company, it's not a legal requirement to have employers' liability insurance if the employees are immediate family members, though if a policy is in place it would still cover immediate family members working for you.
The Health & Safety Executive (HSE) states "It is an employer's duty to protect the health, safety and welfare of their employees and other people who might be affected by their business. Employers must do whatever is reasonably practicable to achieve this."
Do I need employers’ liability insurance?
If you employ people who are not direct family members, even if it's just one person, you’re legally required to have employers' liability insurance, according to the Employers' Liability (Compulsory Insurance) Act 1969. It covers you against an employee making a claim for injury or illness as a result of working for you.
Here's a more detailed look at employers' liability insurance and why you need it.
You'll likely need employers' liability insurance if:
- You deduct income tax and National Insurance from employees' salaries
- You control where, when and how they work
- You supply their work materials and equipment
- You have a right to any profit your workers make
- You require them to carry out the service you employ them for, and they cannot employ a substitute if they are unable to work
- They do the same work under the same conditions as other people you employ.
Who is exempt from employers' liability insurance?
You may find you don’t need employers' liability insurance if:
- You don't employ anyone else
- All your employees are direct family members
- Most public organisations and government departments and health service bodies
For a more detailed guide check out the HSE website. If you’re not sure about anything, seek professional advice as there can be serious implications if you get it wrong.
Do I need employers’ liability insurance for temporary workers?
If you’re worried about which type of workers require covering, we’ve put together a helpful guide. Below are additional types of workers which you will need to insure:
- Temporary staff
- Part-time workers
- Students (including work experience)
- Volunteers – volunteers will still be working on your premises, even if it’s not paid work. They will need to be covered by employers’ liability insurance. If you have an existing policy, before taking on volunteer workers, you should check that volunteers are covered.
However, for contractors and subcontractors, there are slightly different rules:
- Contractors – according to the Government’s HSE, independent contractors who also work for other companies may not need to be covered by employers’ liability insurance. This may need to be reviewed on a case-by-case basis, so it’s best to check your policy, speak to your insurance provider, or seek legal advice if you’re unsure.
- Subcontractors – this can also be complicated. If they are subcontracted on a labour-only basis, then they are working with equipment provided by yourself, and will therefore need to be covered as employees. However, if they are genuine subcontractors, they will not typically require cover. If you’re unsure, consult with them before hiring them.
What does employers’ liability insurance cover?
Employers’ liability insurance covers a range of potential costs that your business may face when confronted with issues regarding your employees. This protects you against the cost of compensation claims, including the compensation payments and the relevant legal costs, to an employee (or former employee) who’s injured or suffers illness directly from working for your business. This may be the result of an unsafe work environment or faulty equipment. Employers’ liability insurance could cover their medical costs, as well as any loss of income while they’re recovering.
A good employers’ liability insurance policy should cover you for claims up to £10 million.
Making an employer liability insurance claim
Examples of employers’ liability insurance claims include:
- A builder suffers an injury from faulty equipment provided to them for work
- A salon worker develops an illness after working with chemical products for an extended period
- An office worker trips and injures themselves on a hazardous surface
- An employee injures themselves after not receiving the appropriate level of health and safety training
- A worker develops an illness due to asbestos in the workplace.
Employers’ liability insurance also covers ex-employees who claim for compensation. Even if the employee no longer works for you, they can still make a claim if they can prove that an injury or illness was the result of work carried out while employed by your company.
Common exclusions to making a claim
You’ll find that not every situation is covered by employers’ liability insurance. Here are some examples of incidents which will leave you unable to claim:
- Deliberate acts that cause injury or illness
- Injuries sustained while travelling (this should be claimed under relevant motor/travel insurance)
- Employees who work off shore
It’s important that you read your policy information carefully, so that you’re aware of any exclusions which you’ll be unable to claim for.
Whether you run construction sites or cocktail bars, financial services or food trucks, you can find insurance that’s specially designed for more than 1,000 types of business. We’ve teamed up with Simply Business to offer you tailored quotes from leading business insurance providers.
If you need more advice, call our partner Simply Business on 0333 016 5956**.
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How much cover do I need?
Your policy must cover you for at least £5 million as a legal requirement. However, your policy will typically cover you £10 million as the industry standard.
The higher risk business you’re in, the more expensive your policy will be, but it's essential that you're adequately covered.
How much does employers’ liability insurance cost?
The cost of employers' liability insurance depends on some key factors:
- The number of employees you’re responsible for – simply put, the more staff you employ, the more expensive it is to insure them all.
- The type of business you run – businesses which operate in high-risk fields are more likely to make your insurance cost more. Builders, and other services which require the use of heavy machinery, are more vulnerable to injury, and so may be more expensive to cover.
- The amount you want cover for – while you’re required by law to be insured for a minimum of £5 million, packages often include limits of £10 million. If you need higher levels of cover, you can expect the price to rise.
How can I reduce claim risk?
The simplest way to reduce the risk of needing to claim is to make your employees’ working environment as safe as possible. If you adopt better health and safety procedures, carry out the relevant risk assessments, and provide your staff with the most appropriate training, as well as well-maintained gear and equipment, your employees will be less likely to have an accident with equipment, or develop illnesses from working with new substances. With these things in place, you’ll help minimalise the risk to your business.
If a new job, procedure or piece of equipment is introduced to your workplace, employers should carry out an updated risk assessment.
For advice on how to minimise risk in the workplace, please check the Government’s HSE website for guidance.
Frequently asked questions
What happens if I don’t have employers’ liability insurance?
Failing to take out adequate employers' liability insurance is against the law and can have serious implications.
You can be fined £2,500 for every day that you're not insured. You can also be fined £1,000 if you don't display your ELCI (Employers' Liability Compulsory Insurance) certificate or don't make it available to inspectors when they ask.
But it could cost you even more. In 2016, a takeaway shop was fined £4,360 in fines and legal costs for failing to produce an ELCI certificate.
How often do work-related injuries happen?
Work-related injuries are still alarmingly high. There were 441,000 self-reported, non-fatal injuries to workers, and 1.7m workers suffering from work-related illnesses in 2020/21.
Once you take out employers' liability insurance, you need to keep up-to-date with current Health and Safety at Work regulations. If you don't, it might invalidate your cover.
What other types of business insurance might I need?
While some types of insurance are a legal requirement, others are optional and depend on the type of business you’re running. If you’re unsure of which type(s) of business insurance you may need, we’ve included some common examples below:
Public liability insurance - get cover against claims for injuries, or damaged property, as a result of your work.
Business interruption insurance – to help compensate you for loss of profits, if your business is unable to operate for a period, for some unexpected reason.
Van insurance - a guide to LGV insurance for business.
Commercial property insurance – to protect your business premises.
Business contents insurance – to protect your business equipment.
Find more information in our guide to the different types of business insurance.
What our expert says...
“As a legal requirement in most cases, it’s really important to ensure you have adequate employers’ liability insurance in place. Employing one or many people adds a great additional responsibility and increases the potential risk of claims or needing to pay compensation. Ensuring you have the right employers’ liability policy in place provides vital protection for both your business and your employees.”
- Anna McEntee, Insurance comparison expert
How can I compare employers’ liability insurance?
Just tell us a bit about you and your business and we’ll help you compare employers’ liability insurance quotes. Once you've found the one that best suits your company, you can apply directly from our website. If you prefer, you can speak to one of our experts at Simply Business, our trusted partner, on 0333 016 5956.