Do I need employers’ liability insurance?

The 1969 Employers’ Liability Act expanded upon previous legislation from 1880. The main change was to make this insurance compulsory for businesses and to give employees easier routes to compensation for workplace injuries.  

The latest version of the Employers’ Liability (Compulsory Insurance) Act 1969 (external link)[1] states: 

• Businesses, groups and individuals that employ staff must hold at least £5 million in employers’ liability insurance[2] 
• This must be from an authorised insurer that is registered with the Financial Conduct Authority (FCA)[3] 
• Certification – the Employers’ Liability Certificate – must be on display to show employees that you hold this cover. 

Learn more with our guide to what employers’ liability insurance covers and our article on the Employers’ Liability Act. 

There are different classifications regarding necessary insurance and no two businesses are the same. Here’s a guide to the rules: 

Contractors  

Contractors may need employers’ liability insurance if they employ others directly. However, a business will not typically need an employers’ liability insurance policy to hire an independent contractor who doesn’t work exclusively for your organisation. You also may not need coverage for freelancers who are demonstrably doing business for their own profit[4]. 

Subcontractors  

You may need employers’ liability insurance for subcontractors, even if they are labour-only.  

However, when considering whether you need employers’ liability insurance for subcontractors, ask yourself if they could employ a substitute if they were unable to complete the job themselves. If it’s a yes, you might not need cover. 

Part-time employees  

As with full-time staff, part-time employees also need employers’ liability insurance. If you’re self-employed and hire someone to help with your workload, even part-time, you will usually require a policy. 

Volunteers 

Volunteers usually need employers’ liability coverage and are often treated in the same way as other staff members.  

This includes volunteers who are: 

• Unpaid students 
• Taking part in a youth training programme 
• Enrolled in a work experience scheme. 

In most cases, these groups are covered under a company’s regular employers’ liability policy. If you do not have any other staff or employers’ liability cover in place and aren’t sure, you should obtain legal advice about how your situation relates to legislation[5]. You can learn more from the Health and Safety Executive (HSE). (external link)  

Temporary employees  

If you have temporary employees, you need employers’ liability insurance. It’s essential to have this cover for all temporary employees, including interns, event staff and those on fixed-term contracts (FTC). Whether they work for you for four hours or four years, the law treats all employees equally. 

Apprentices  

By law, apprentices also need employers’ liability insurance coverage in the UK. This means you should have a policy in place for any apprentices you employ, whether they work at Level 2 or 7. 

Circumstances can vary, so it may be best to check before anyone begins work for your business, especially if you feel there might be grey areas. 

For instance, in some cases, you do not need employers’ liability insurance if you do not deduct income tax or national insurance from someone’s pay. However, this is just one marker of employee status – a self-employed person might count as an employee in other ways. 

Even in cases where exemptions apply, there may still be work-related risks to your employee or helper’s health. If they became ill or injured, these parties might still take legal action. Without adequate insurance cover, this can bring financial risk to your business. 

There are a small number of businesses not legally obliged to hold an employers’ liability insurance policy. 

These are: 

• Most public organisations, such as the armed forces  
• Health service bodies, such as the NHS 
• Some organisations financed by public funds 
• Family businesses that only employ close members of the family 
• Sole-employee businesses (unless requested by clients, or if you own less than 50% of the shares in your limited company). 

[1] - https://www.legislation.gov.uk/ukpga/1969/57/contents

[2] - https://www.gov.uk/employers-liability-insurance

[3] - https://www.gov.uk/employers-liability-insurance

[4] - https://www.hse.gov.uk/pubns/hse40.pdf

[5] - https://www.hse.gov.uk/pubns/hse40.pdf