Employers’ liability requirements and who’s exempt

Employer’s liability insurance isn’t just a box to tick – it’s a legal safeguard that protects businesses and their employees, so understanding employer liability requirements is a must.

If someone working for you suffers an injury or illness because of their job, it helps you meet compensation costs without putting your business at financial risk.

In the UK, most employers are legally required to have it, but there are some important exceptions. In this guide, we’ll break down the requirements for those who need employers’ liability and who’s exempt, so you can stay compliant and confident.

*Disclaimer – this a general guide to employers’ liability insurance and exact coverage, conditions and exclusions may differ per policy and insurance provider. Always check your policy schedule and documents for more information.

First, a quick recap on what employers’ liability insurance is…

What is employers’ liability insurance?

In the simplest terms, employers’ liability insurance covers legal costs and compensation claims made by employees who become ill or injured due to their job while working for you.

It’s there to protect anyone you employ, whether on a permanent or temporary basis, while also protecting your business from the financial risk of potential claims.

You’ll likely need to consider insurance if you employ:

• Full-time employees
• Part-time employees
• Apprentices and trainees (if they’re paid)
• Temps and agency workers (depending if they’re under your direction and control)
• Some self-employed contractors (if they’re under your direction and control)

If you’re unsure if someone you hire counts as an employee for employment status purposes, you can check the government’s Employment status guide, or seek professional advice.

It’s important to distinguish between status for tax purposes and status for employment purposes – a person can be seen as an employee for employment law, but have a different status for tax. You should always determine a worker’s status under each law separately.

Do you legally need employers’ liability insurance?

Yes, employers’ liability insurance cover is one of the only insurance types required by law for any business that employs staff.

Employers are responsible for the health and safety of employees while at work – they’re also responsible for making sure they can cover the cost of compensation for staff who become ill or injured while completing work duties. That’s why employers’ liability is essential (and legally required!).

There are some businesses exempt from the legal requirement of employers’ liability (we’ll go into this below), but most businesses need it.

Employers’ liability requirements

For businesses who do legally need employers’ liability, there are a few requirements to bear in mind:

• Minimum £5million cover: your insurance must offer a minimum £5 million of cover.

It’s always best to assess your business’ circumstances – you may need more. Many insurers offer a £10 million cover limit as standard.

• Use an authorised insurer: you must use an insurer that’s authorised by UK financial regulators – Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA). You can easily check your insurer against the Financial Services Register.
• Display your certificate: when you take out an insurance policy, your insurer will give you a certificate of employers’ liability insurance. You must display this somewhere employees can easily see it – this can be electronically.
• Make it available to inspectors when asked: The Health and Safety Executive (HSE) enforces the law on employers’ liability and can check if you hold the right cover. You must provide your certificate if inspectors ask for it.

What happens if I don’t have employers’ liability?

If you don’t hold employers’ liability cover you can be fined for:

• £2,500 for every day you don’t hold proper insurance
• £1,000 if you don’t show it to inspectors when asked

You’ll also be liable to pay any compensation claims and legal fees from your own (company) pocket if an employee takes action for an injury or illness they get while working for you – you won’t have any financial support from your insurance!

Who’s exempt from employers’ liability?

Employers’ liability insurance is a legal requirement for most businesses that employ anyone but there are some business types and circumstances that are exempt:

• Most public organisations like government bodies, local authorities, police authorities etc.
• Sole traders who don’t employ anyone else
• Limited companies who don’t employ anyone else and the owner owns at least 50% of shares
• Family businesses that only employ close relations (e.g. husband, wife, parents, children, siblings etc.) and who aren’t incorporated as a limited company
• Some organisations financed through public funds like passenger transport and executive magistrates’ courts committees

Other exemptions – the nature of employment

Employers’ liability is required by law if you employ anyone under a contract of service or apprenticeship. Some working relationships may not count as ‘employment’ under certain conditions, which might mean you don’t need insurance for these people.

It comes down to the real nature of the working relationship and the degree of control you have over the work they do.

You may not need employers’ liability insurance for people who work for you where:

• They work for multiple clients and do so independently
• They use most of their own tools, equipment, and materials to get the job done
• They’re clearly running their own business and working for their own benefit
• They can send someone else to do the work if they’re unavailable (substitution)
• You don’t deduct income tax or National Insurance from their pay

It’s worth noting that even if someone is classed as self-employed for tax purposes, they may count as an employee for other reasons, and you might still need employers’ liability to cover them.

And remember, even if you don’t employ anyone right now, a client may require you to hold employers’ liability insurance to cover any contractual substitution clauses. And of course, things can change very quickly in business. So, it’s worth future-proofing in case you suddenly need to take on extra workers.

If you’re unsure if you need cover, it’s best to double check with experts – our in-house team would be happy to help.

Employers’ liability with Kingsbridge

Our Contractor Insurance package includes all the essentials, so you can tick the legal boxes and protect yourself without the hassle of juggling multiple policies. Here’s what’s inside:

• Employers’ Liability (£10 million coverage as standard)
• Professional Indemnity insurance
• Public Liability cover
• Directors’ & Officers’ Liability
• Personal Accident cover

Plus, you can tailor your policy with optional add-ons like Legal Expenses insurance, Cyber Liability cover and IR35 insurance.

Whether you’re just starting out or renewing your policy, it’s a complete package designed for contractors – giving you peace of mind and financial protection. Need advice or want to set up your cover? Our friendly team is ready to help – just get in touch.

You can reach our dedicated experts on 01242 808740 or jump straight to it and get a quote today.

Employers’ liability FAQs

What is covered under employers’ liability?

Employers’ liability insurance covers compensation and legal costs if an employee becomes ill or is injured because of their work. The policy normally pays for lost wages, compensation, and legal defence costs if your business is found liable. It can cover claims from full-time, part-time and temporary staff, apprentices, and sometimes volunteers.

What is the fine for not having employers’ liability?

If you’re legally required to have employers’ liability insurance and don’t, the Health and Safety Executive (HSE) can fine you up to £2,500 for every day you’re not insured.

There’s also an additional fine of £1,000 for failing to display your insurance certificate when asked. These penalties apply even if no accident has occurred.

What are examples of employers’ liability claims?

Common examples of employers’ liability claims include:

• A worker slipping on a wet floor and breaking a bone
• An employee tripping on a loose carpet in your office
• A construction employee developing respiratory problems from dust exposure
• An employee getting injured using faulty machinery or after inadequate training

What’s the difference between public liability and employers’ liability?

The key difference is who the incident has happened to:

• Employers’ liability covers claims from employees who suffer work-related injuries or illnesses while working for you. It’s a legal requirement if you employ staff.
• Public liability covers claims from third parties (customers, clients, or members of the public) who are injured or have property damaged because of your business activities. Public liability isn’t compulsory but is strongly recommended for businesses that interact with third-parties.

Do I need employers’ liability if I work alone?

If you work completely alone and have no employees, you usually don’t need employers’ liability insurance, specifically for limited companies where you’re the only employee and have at least 50% of the shares. However, there are exceptions:

• If you run a limited company with more than one director, you may need it
• If you use volunteers, apprentices, or labour-only subcontractors, you’ll likely need cover
• Immediate family members may be exempt, but check the rules carefully. When in doubt, confirm with an authorised insurer or broker

How much employers’ liability do I need?

By law, UK businesses must have at least £5 million of cover from an authorised insurer. Most insurers provide £10 million as standard, which is recommended for better protection. This particularly applies to businesses in higher-risk sectors like construction or manufacturing. Larger firms or those with significant risk exposure may need more.