Table of Contents
- What is Employers’ Liability Insurance?
- Is employers’ liability insurance a legal requirement?
- What does employers’ liability insurance cover?
- How much does employers’ liability insurance cost?
- Who does employers’ liability insurance cover?
- What other business insurance do I need?
- Employers’ liability insurance – FAQs
Employers’ liability insurance is essential for UK businesses with employees, aside from a small number of exceptions. Failing to have this form of insurance can result in fines of up to £2,500 for every day you don’t have proper coverage, so understanding employers’ liability is essential.
What is Employers’ Liability Insurance?
If you employ anyone in the UK, and they’re not part of your family, you will likely need employers’ liability insurance.
Employers’ liability insurance protects your business if someone who works for you is injured or falls ill due to their work. It helps cover the cost of compensation and legal fees if your employees make a successful claim against your business.
You can buy it as standalone cover or as part of a broader business insurance package. Without it, you could be liable to pay costs related to any claim, which could run to significant amounts – and you may also be breaking the law.
» MORE: What is business insurance?
Is employers’ liability insurance a legal requirement?
In many cases, employers’ liability insurance is a legal requirement.
If you employ anyone to work in the UK who isn’t part of your family – even just one casual worker – you are legally obliged to take out employers’ liability insurance. In Northern Ireland, it’s called employers’ liability compulsory insurance (ELCI).
You must:
- have cover in place as soon as you employ anyone
- take out a policy that covers you for at least £5 million
- buy insurance from an authorised insurer – you can check this by using the Financial Conduct Authority’s Financial Services Register
You can be fined £2,500 for each day you don’t have insurance or don’t meet the above criteria. You must also display your employee liability certificate and make it available to an inspector if you’re asked to, or face the possibility of a £1,000 fine.
If you only employ family members, such as your spouse or civil partner, parents, grandparents, siblings or children, you may not legally need employers’ liability insurance. However, if you are a limited company, the exemption won’t apply.
Even if you are exempt, you can still take out cover if you want to. You may want to consider whether you could afford to pay out compensation if an employed family member made a claim against you.
What does employers’ liability insurance cover?
The long and short of it is that employers’ liability insurance covers your business against claims made by employees who become injured or ill because of the work they do. However, there are some specific instances that may not be covered by this type of insurance. These are:
- injuries or illnesses caused by an employer’s deliberate or willful actions
- claims related to asbestos
- injuries and illnesses caused by terrorism
- some claims arising from driving incidents
How much does employers’ liability insurance cost?
The price of employers’ liability insurance can vary based on factors such as:
- the level of cover you choose
- the nature of your type of business and the risks it faces
- how many employees you have
- your claims history
- the location of your business
Employers’ liability insurance will typically not set your business back too much, with some insurers providing cover for less than £5 per month.
Following strict safety procedures and proving that your staff have the necessary training and safety equipment to minimise risk while working may help reduce the cost of your cover.
Who does employers’ liability insurance cover?
Employers’ liability insurance will cover your business’s employees. This will likely include:
- permanent employees (full time or part time)
- seasonal or temporary workers
- labour-only subcontractors
- volunteers
- students on work placements
Does employers’ liability insurance cover contractors?
Contractors and labour-only subcontractors may also be covered if they are treated in the same way as an employee would be. For example, if you supply a contractor with the tools they need for the job, or are responsible for when, where and how they work, they may be covered.
On the other hand, if a contractor supplies their own tools and materials, does not work exclusively for you, and gets paid without National Insurance or income tax being deducted, you may not need cover for them.
Your employees are covered under employers’ liability insurance whether they have a written employment contract or an assumed contract. This would apply if you spoke about the work and agreed on the terms in person, for example.
Do you need employers’ liability for two directors?
Even if you don’t employ anyone, if your limited company has directors who own less than 50% of shares in the business, you need employers’ liability insurance. For example, if two directors split the shares 60:40, the director owning 40% of the business would need to be covered by employers’ liability insurance.
What other business insurance do I need?
Employers’ liability insurance is important, but your business will likely need other forms of insurance too. You might want to consider the following forms of business insurance:
- Public liability insurance: This will cover your business against claims made by members of the public who have been injured or suffered property damage.
- Product liability insurance: Products made by your business can injure people, make them ill or damage their possessions. Product liability insurance protects your business in these scenarios.
- Professional indemnity insurance: If your business offers advice or performs services that could result in losses or damages to clients, professional indemnity insurance can provide cover.
- Cyber insurance: Hackers, data breaches and cybercrime are threats for all sorts of businesses. This is where cyber insurance can protect your business.
- Commercial property insurance: If your business has premises this can provide protection for both the building and its contents.
Employers’ liability insurance – FAQs
Not having employers’ liability insurance is not only illegal – in some instances – but it is potentially very bad for business as well.
Not having it can lead to fines of £2,500 per day, as well as fines of £1,000 for failing to display or produce an employers’ liability certificate when asked by inspectors.
Then there’s the fact that employers’ liability insurance protects your business against claims made by employees, trainees, volunteers and apprentices who are injured or fall ill due to their work.
While a sole director with no employees might not be required by law to hold employers’ liability insurance, clients may require your business to hold this form of insurance. In addition, as soon as your business needs to bring in hired help or even unpaid volunteers, you need to get employers’ liability insurance.
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