Do I need employers’ liability insurance?

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As a result of the Employer’s Liability (Compulsory Insurance) Act 1969 (external link), it’s a legal requirement for most UK businesses to have employers’ liability insurance, meaning it can be essential cover if you have employees.

Whether you’re a sole trader, small business owner or part of a global empire, not having sufficient employers’ liability cover can lead to substantial fines. These could be up to £2,500 a day until you take out a policy.

So, what does the law say about different types of staff? There are different classifications and no two businesses are the same, so here’s a guide to the rules:

  • Contractors – you might not require an employers’ liability insurance policy if you’ve hired an independent contractor who doesn’t work exclusively for your business
  • Subcontractors – if a subcontractor uses their own equipment, tools and materials then they usually don’t need to be covered by a policy but if they will be using yours, you might require cover
  • Part-time employees – if you’re self-employed and employ someone else to help with your workload, even part-time, you will require a policy
  • Volunteers – you need employers’ liability cover in place if you employ volunteers
  • Temporary employees – it’s essential to have this cover for all temporary employees, including interns and students on work experience
  • Apprentices – it’s also a legal requirement to have a policy in place for any apprentices you employ

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

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

These are:

  • Most public organisations
  • Health service bodies
  • 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)
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