Do I need Employers Liability Insurance?

When employees are working for you, it is you, the employer, that is responsible for their health and safety. So if an employee is hurt at work, or develops a work-related illness, they might blame you and try to claim damages.

The legal requirement for employers to purchase employers liability insurance was introduced under The Employers’ Liability (Compulsory Insurance) Act 1969. The Act requires virtually all employers to have a minimum level of insurance to cover any claims for compensation from employees.

Employers’ liability insurance will enable you to meet the cost of compensation for your employees’ injuries or illness whether they are caused on or off-site. The Health and Safety Executive (HSE), is responsible for enforcing the law on employers’ liability insurance.

What if I only employ part-time staff?

Even if you do not employ any full-time staff but do occasionally take on temporary or seasonal staff, you will still need to take out employers liability insurance.

If you’re not sure whether you need cover, a good guide is to consider whether you dictate when and where someone works, and whether you deduct their income tax and national insurance contributions. If the answer is ‘yes’, then they probably count as being your employee.

Are there examples of when I don't need to buy this cover?

There are very few exceptions where the legal requirement for any firm with an employee to have employers liability insurance (EL insurance) is waived. However, there are two scenarios where a small business or start-up may be exempt from having to buy employers liability cover, these are;

1. For Limited companies - If you are a director of a limited company, own at least 50% of the shares, and have no other employees then you are not legally required to purchase employers liability cover.

2. For unincorporated businesses (sole traders and partnerships) - If your unincorporated business, that is where the business is operated as a sole trader or a partnership, the business employs only close family members then the law does not require you to have employers liability insurance.

(HSE defines close family members as; husband, wife, civil partner, father, mother, grandfather, grandmother, stepfather, stepmother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother or half-sister.)

What actually is covered by employers liability insurance?

As the name suggests, employers liability insurance is designed to protect business owners and operators against some of the most commonly faced risks associated with taking on employees.

This usually includes illness and injury that occurs on business premises, or as a direct result of the individual’s working practices.

It may not include incidents that occur while driving, but these will usually be covered separately by the business’s motor insurance policy.

Employers liability insurance, as the name suggests, relates only to the individuals who are actually employed by your company, and not to any visitors to your premises. Look out for any potential risks at your workplace for anybody who isn’t an employee, such as members of the public or visitors to your premises, as you will need public liability insurance cover for this.

Nigel Bailey