Do I need employers’ liability insurance?

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Understanding your legal responsibilities as an employer

In most circumstances, having an employers’ liability policy is a legal requirement for any business with employees, even if you only employ one other person or you have employees on a temporary contract. Failure to secure appropriate cover could incur fines of up to £2,500 a day until you take out a policy.

In the UK, the Employers’ Liability (Compulsory Insurance) Act 1969 requires that you have a minimum cover of at least £5 million. There are some exceptions, such as public organisations and small businesses which only employ close family members (although this exemption does not apply to family businesses incorporated as limited companies). contract.

Who needs employers’ liability insurance?

Any business with employees should possess employers’ liability insurance. Even if you only hire staff on a temporary or unpaid basis, you will still be required to open a policy, to cover them if they were to have an accident or fall ill due to work.

If you hire independent contractors who are employed by another organisation, you may not be responsible for providing cover, though subcontractors who are ‘labour- only’, work under your direction and use your tools and materials are legally considered employees and will require cover by your business. It’s important to check when contractors are involved, as circumstances can vary.

Businesses that are not legally obliged to hold employers’ liability insurance are most public organisations, health service bodies, and some other organisations financed by public funds; as well as family business that only employ close members of the family (as referenced above).

If you are the sole employee of your business, you are not legally required to hold employers’ liability insurance (unless you own less than 50% of the shares in your limited company), however, some clients may request you have it as a term of your contract.

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