What is employers’ liability insurance?

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Employers’ liability insurance safeguards businesses against legal and compensation expenses from employee claims. It’s a key type of insurance, because if one of your employees falls ill or sustains an injury in the context of the work they do for you, you could be held liable.

The health and safety of your employees is of paramount importance, and as an employer it’s vital to uphold that responsibility. Something as simple as slipping on a wet floor could lead to a claim. As accidents do happen, you can protect the vitality of your business with an employers’ liability insurance policy.

Do I need employers’ liability insurance?

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’s 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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What does employers’ liability insurance cover?

Employers’ liability insurance will cover the cost of settling and defending any claim made by an employee against your business. This includes compensation pay-outs and legal fees should the case go to court.

If an employee claim does end up in court, a compensation sum might reflect factors such as medical costs and loss of income due to the employee not being able to work. Employers’ liability will cover this cost up to the policy limit.

It’s vital to have an employers’ liability insurance policy in place as it’s a legal requirement for most UK firms. You could be held responsible for any injury your employees sustain while carrying out work for your business.

A policy covers all injuries, from what might seem like an innocuous trip or slip, to a long-term illness suffered because of their work. It’s important to note that claims can still be made after an individual has stopped working for your business – this is because symptoms may only become apparent after several months.

You can’t predict or even prevent accidents from happening, but you can safeguard your business from the financial repercussions. Employers’ liability cover can be a lifeline, especially for small businesses and sole traders who might not otherwise have access to the necessary funds.

How much employers’ liability insurance do I need?

Businesses in Britain are required by law to have cover worth at least £5 million as soon they employ their first member of staff. Of course, the nature of work and the risks involved in each business may vary, meaning you may require more employers’ liability insurance. To work out how much you need, consider how much the most serious claim you might face could cost

While there are some circumstances in which a company doesn’t require this cover, these instances are rare. The reassurance of having comprehensive cover is invaluable, as the cost of defending your business against a liability claim could prove damaging, especially for start-ups and SMEs.

The cost of your insurance policy will also vary in line with the value of the cover you take out. Quotes are based on factors such as how many people you employ and the type of work you do. Premiums are often higher in high-risk professions where you work in more dangerous situations, like plumbers, engineers or electricians.

The best way to get an idea of how much employers’ liability insurance you need and what it will cost your business is to get a free quote online. Once you have this, protect your world with the right level of business cover by speaking to an insurance specialist for a quote tailored to your specific requirements.

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