What is Employers’ Liability insurance?

Blogs 7 Mar 2023

Running a small team? Find out why Employers’ Liability insurance is a must-have, what it covers, and who it applies to, with top tips from our business insurance experts.

Small business owner and employees in cafe serving customers

Employers’ Liability insurance is just one of many types of business insurance and it's a legal requirement if you're an employer. But what exactly is it, what does it cover, and who needs it? Our insurance experts from FSB Insurance Service answer your frequently asked questions.

What is Employers’ Liability insurance?

This insurance protects your business for incidents where you have been negligent and can be held legally liable. It covers your business against lawsuits that may develop as a result of an injury, such as if one of your employees, past or present, makes a claim against you and your company.

Examples of incidents that Employers’ Liability insurance could cover, include:

  • A factory worker cutting their hand while using your company machinery
  • Your secretary suffering from repetitive strain injury from persistent computer work in your office
  • One of your employees falling off scaffolding while doing construction work, breaking their leg and needing time off work

Payments you’d have to make because of claims following such incidents can be very costly, going into the tens of thousands, which can be enough for a small business to have to close down. This insurance will help protect you and pay for compensation and any additional legal costs, allowing your business to keep operating.

Is it a legal requirement to have Employers’ Liability insurance?

Of all the types of business insurance, Employers’ Liability is one that is essential and legally required for most businesses in the UK. You’re breaking the law if your company employs one or more members of staff and you don’t have this insurance.

This doesn’t just apply to your full-time staff. Your part-time and temporary staff should be covered too. In general, you’ll need to cover staff who you pay to work for you per hour on agreed days and deduct National Insurance and income tax from the money you pay them.

The cover also applies to staff who previously worked for you. This is because some illnesses or injuries can take time to become apparent and develop.

Who doesn’t need the cover?

Although legally required, it’s important to point out that some companies are exempt from Employers’ Liability insurance. These are:

  • Family businesses: where employees are closely related to the company owner, such as a son or daughter, husband, or wife. It doesn’t include family businesses that are incorporated as limited companies. 
  • Limited companies: where one person is employed who owns more than 50% of the share capital.
  • Sole traders: where the company is not limited and has only one employee who runs the business.

How much cover do you need?

The UK Act of Parliament, the Employers’ Liability Act, states a business must legally have insurance cover of at least £5 million. But it’s a good idea to look at your company's risks and liabilities, like considering the cost of a member of staff taking you to court, to decide if your business needs more cover than this.

It’s worth knowing that most insurers provide Employers’ Liability cover of at least £10 million. They can also offer it as part of a package that includes other insurance, such as Public Liability or Product Liability.

The cost of your insurance can also depend on different factors, including the number of employees in your business and the size and type of company you run. 

What happens if you don’t have the right cover?

If your business doesn’t have Employers’ Liability insurance in place and legally should do, you can face fines of up to £2,500 per day.

It’s not enough to have the right coverage. Displaying your insurance certificate is also essential. You can be fined £1,000 if you don’t display your insurance certificate so your employees can clearly see it or have access to it and know when to find it. For example, this could be on a display board, in a company folder, or saved in a digital format on your company intranet.

Is your business protected?

Employers’ Liability insurance is a key area of cover for many businesses, but just one of many that can help to protect your company and its future development. 

Business insurance that makes sense

FSB Insurance Service is designed by small businesses for small businesses. An award-winning full general insurance broking service with exclusive discounts, tailored support and a dedicated insurance advice line.

Find out more

FSB Insurance Service Limited is authorised and regulated by the Financial Conduct Authority (FCA Registration No: 788654) Registered Office: 20 Fenchurch Street, London, United Kingdom, EC3M 3AZ. Company Number: 10831