Employers liability insurance is one of the few insurances the law actually requires. Under the Employers’ Liability (Compulsory Insurance) Act 1969 you must hold it from the day you employ anyone — not from your first payroll run, and not once you reach a certain size.
The penalty is up to £2,500 for every day you are uninsured.
What it covers
Claims by employees who are injured or become ill because of their work. If someone is hurt at work and the business is found liable, this is what pays the compensation and the legal costs.
It is not the same as public liability insurance, which covers claims by members of the public and is not compulsory. Employers liability covers your own people; public liability covers everyone else.
How much cover
The legal minimum is £5 million. In practice most policies are sold at £10 million, because the difference in premium is small and a serious injury claim can exceed £5 million once care costs and lost earnings are included.
Who needs it
If you employ anyone, assume you need it. It applies whether they are full-time, part-time, temporary, seasonal or on a zero-hours contract, and whether or not they pay tax through your payroll.
| Situation | Insurance needed? |
|---|---|
| One part-time employee | Yes |
| Casual or seasonal staff | Yes |
| Volunteers and work experience students | Yes |
| Genuinely self-employed contractor with own insurance | Usually no |
| Sole trader with no employees | No |
| Family business where all employees are close family | Usually exempt |
The exemptions
There are two worth knowing:
- Family businesses where every employee is a close relative — but this does not apply to limited companies, which catches out many family firms that incorporated
- Companies with a single employee who owns 50% or more of the share capital — the typical one-person limited company
If you are exempt today and hire someone tomorrow, the duty starts immediately.
The certificate
Your insurer issues a certificate showing the cover and the period. You must make it available to employees — displaying it at the workplace or making it accessible electronically both satisfy this.
The Health and Safety Executive enforces the requirement and can ask to see it. A further fine of up to £1,000 applies for failing to display or produce a certificate.
Keep expired certificates. Some workplace illnesses appear decades after exposure, and a claim may be made long after the policy ended. Insurers recommend keeping them for at least 40 years.
Employing someone at home
A nanny, cleaner or carer you employ directly counts. Many home insurance policies include employers liability cover for domestic staff, so check before buying a separate policy — but check that it is actually there rather than assuming. See our guide to employing someone at home.
What it costs
For a low-risk office employer, employers liability is typically a modest annual premium and is usually bundled into a business insurance package. Premiums rise with headcount, payroll size and the risk of the work — construction and manufacturing cost substantially more than an office.
Either way, it is one of the smaller items in the real cost of employing someone. Our employment cost guide puts it alongside employer National Insurance and pension contributions.
Common mistakes
- Waiting until the first payday — cover must be in place from the first day of employment
- Assuming volunteers do not count — they generally do
- Relying on the family exemption after incorporating — it does not apply to limited companies
- Treating public liability as the same thing — they cover different people
- Destroying old certificates — claims can arrive decades later
- Assuming a contractor is outside it — if you control their work, they may be an employee in law whatever the contract says
Getting the employment relationship right matters for insurance and payroll alike. Our free payslip generator handles the payroll side, and the HMRC PAYE Online guide covers registering as an employer.