What is employers’ liability insurance?

You can get business insurance in several different types, but few are required by law. Employers’ liability insurance is a notable exception.

What does employers’ liability insurance cover?

Employers’ liability insurance shields you from the costs associated with legal claims brought by current or former staff members. It covers claims from permanent and temporary employees, trainees, interns, apprentices, volunteers and even friends who are helping out. 

Why does employers’ liability insurance cover ex-employees?

Anyone who works for you has the right to sue if something goes wrong that they hold you responsible for, including ex-staff members. 

For example, imagine you expand your workforce during a busy period, such as Christmas. If one of your temporary employees suffers repetitive strain injury after repeatedly sealing envelopes at work, they could sue even if the symptoms only emerge after they move on. 

What benefits does employers’ liability insurance offer? 

Although policies differ depending on the insurer, you can expect the following benefits:

• Cover for legal fees and compensation arising from injury or illness, starting from £5 million

• A daily rate of compensation if you need to attend court to defend a claim

• Compensation for directors, partners and employees if they’re summoned to appear in court

• Access to a 24-hour legal helpline

• Immediate cover for temporary staff

Most also give you the option to pay for a policy on a monthly or annual basis.

As the name suggests, employers’ liability insurance only covers you for injuries and illnesses affecting staff members. If you want to protect yourself from similar claims by other people, you need to get public liability insurance. You can find out more about the benefits of this type of insurance in our What is public liability? guide. 

How much employers’ liability insurance do I need?

To find out how much cover you need, you need to consider several factors. 

These include the type of business you run, the number of people you employ, how you pay your staff and your claims history. 

A newsagent in a small village employing two shop assistants would expect to pay less than a window cleaner with two helpers. Likewise, a building contractor with four labourers working on a construction site would typically pay more than an accountant with the same number of employees.

Costs also depend on how much coverage you want. The legal minimum is £5 million, but a big firm or one involved in riskier business activities may need more. Many insurers offer £10 million of cover as standard.

How much does employers’ liability insurance cost?

It is always worth shopping around and comparing employers’ liability insurance policies. 

Annual costs typically range from around £50 to more than £600 a year. Some businesses may be considered riskier than others. Even if you follow all the health and safety basics, injury or illness can happen at, or be traced to, any place of work. 

For example, a shop worker who is injured because they slipped on a wet floor could sue their employer. They could do this even if the slippery surface was caused by a customer spilling a drink. 

Riskier jobs attract higher policy prices, not just because the chance of an accident is greater, but because the cost of a claim increases. A shop worker twisting an ankle after a slip is less likely to suffer serious injury than a scaffolder who falls from a high platform.

Aside from risk, the number of staff you have can dictate what you pay. You can expect to pay less if you only have one employee than you would if you have two. But the costs don’t rise directly in line with the number of employees. For example, you may pay £210 for one office worker, but £350 for three.

Is employers’ liability insurance a legal requirement?

Employers’ liability insurance is a legal requirement in almost all cases where you have people working for you, even if you’re not paying them. 

Here’s what the Employers’ Liability Act (1969) says:

• You must have at least £5 million of cover, bought from an authorised insurer or broker.

• The law applies to everyone from small firms to large corporate groups. 

• You must display a valid certificate of employers’ liability insurance somewhere your staff can see it. If staff work remotely, this can be on your website. 

• If staff working at offshore installations or associated structures ask to see a copy of your insurance certificate, you must show it to them within 10 working days. 

Read more:
When do I need to show my insurance certificate? 

What should I know about my business insurance certificate?

What happens if I don’t comply with the law on employers’ liability insurance?

If you don’t have valid employers’ liability insurance, HMRC can fine you £2,500 for every day you haven’t complied with the law. 

You could also face a £1,000 fine if you don’t correctly display your insurance certificate, or fail to produce it when asked to do so. 

Who doesn’t need to get employers’ liability insurance?

While most employers need this type of cover, some don’t need it. These include:

• Government departments and agencies, local authorities, police services and nationalised industries

• Health service bodies, including NHS trusts, primary care trusts and Scottish health boards

• Certain organisations that are financed through the public purse, including magistrates’ courts committees

• Businesses that exclusively employ close family members, such as offspring and parents, unless the business is incorporated as a limited company

• Companies employing only the owner who owns at least 50% of the issued share capital in the firm

Additionally, you may not need employers’ liability if you employ sub-contractors and others who don’t work exclusively for you. This can include workers who provide their own equipment and materials. 

Where to go for advice about whether you need employers’ liability insurance

If you're unsure whether you need this type of cover,  don’t worry. Speak to a trade body, Citizens Advice, a business insurance provider, or an insurance broker. They’ll be able to help you.

Read more: Do I need general business insurance?