Employers' Liability Insurance

Employers’ Liability Insurance helps to protect businesses against financial setbacks relating to work related injuries or illness claims. It typically covers legal defence expenses and/or compensation where the claimant is successful and covers many types of employees including permanent, contract, casual, seasonal, temporary staff, students, those on work placements and some sub-contractors.

Important information: Employer’s Liability Insurance does not automatically cover every type of subcontractor. If a subcontractor’s own insurance fails or lapses, your insurer may still provide cover - but only if you can demonstrate that you took reasonable steps to verify their insurance was valid before work began. Read more in our “Are subcontractors covered by my Employers’ Liability Insurance and what’s the difference between BSFC and LOSC?” FAQ.

Employers’ Liability Insurance protects your business financially and legally if an employee is injured or becomes ill due to their work. It's not just a legal requirement in the UK - it's a vital safeguard for your team and your company. Here’s a breakdown of the key benefits:

Legal compliance

• It’s a legal requirement under the Employers’ Liability (Compulsory Insurance) Act 1969 for most UK businesses with employees.
• You must have cover of at least £5 million, though most insurers provide £10 million as standard.
• Non-compliance can result in fines of £2,500 per day without valid insurance and £1,000 for not displaying the certificate.

Covers compensation & legal costs

• Pays for compensation claims if an employee is injured or becomes ill due to their work.
• Covers legal fees, medical expenses and court costs associated with defending or settling a claim.

Protects all types of employees

• Covers full-time, part-time, temporary, seasonal and even some self-employed workers under your supervision.
• Also applies to former employees who develop work-related conditions after leaving the business.

Supports legal defence

• Many policies include legal representation and daily compensation (limits apply) if you must attend court.
• Some also cover prosecution costs under health and safety laws.

Peace of mind for you and your team

• Demonstrates that you take employee welfare seriously.
• Helps build trust and morale by showing your commitment to a safe working environment.

Business continuity

• Without cover, a single claim could potentially lead to devastating financial losses.
• Employers’ Liability Insurance helps to ensure your business can continue operating even after a serious incident.

Under the Employers’ Liability (Compulsory Insurance) Act 1969, UK businesses must have Employers’ Liability Insurance as soon as they hire employees.

If you don’t have Employers’ Liability Insurance when it’s legally required, your business could face serious financial and legal consequences in the UK, including:

Legal penalties

• £2,500 fine per day: You can be fined for every day you operate without valid Employers’ Liability Insurance.
• £1,000 fine: If you fail to display your insurance certificate where employees can easily see it - physically or digitally.

Uncovered compensation claims

• If an employee is injured or becomes ill due to their work and you don’t have insurance, you’ll be personally liable for compensation, medical costs and legal fees.
• These costs can cause severe financial pressure, especially for small businesses.

Legal action and business disruption

• You may face lawsuits from employees or their families.
• Legal proceedings can damage your reputation and disrupt operations.

No protection for past employees

• Without current cover, you’re exposed to claims from former employees who develop work-related conditions years later.

Some insurers now obtain your ERN from HMRC, however others may still request this information from you when setting up Employers’ Liability Insurance. You can usually find your ERN on HMRC documents like your P30 or P60. It looks like: 123/AB456.

Why your ERN is needed

The ERN helps insurers register your policy with the Employers’ Liability Tracing Office (ELTO). This ensures that former employees can trace your insurance if they make a claim years later.

If you don’t have an ERN yet

Some businesses may be waiting on confirmation of their ERN from HMRC. You should still be able to get a quote for Employers’ Liability Insurance, but may need to supply the ERN once you register as an employer.

Please note that some businesses may be ERN exempt. You won’t have or need an ERN if:

• You’re a sole trader with no employees.
• You’re a company director and the only person working in the company, and:
  • You take income only as dividends (not through PAYE salary).
  • You don’t pay yourself above the NI threshold.
• You only use self-employed contractors who handle their own tax and NI.
• You only pay volunteers or family members with no wages or taxable benefits.
• You employ people outside the UK who don’t pay UK tax or NI.

Employers’ Liability Insurance is legally required for most UK businesses that employ staff. It helps to protect you if an employee is injured or becomes ill due to their work and helps cover compensation and legal costs. Those that need it, include:

• Limited companies with employees: Required even if you only employ one person, including part-time or temporary staff.
• Businesses with apprentices, interns or volunteers: If they work under your supervision or control, they count as employees.
• Limited companies with family members as employees: Even if you only employ close relatives (e.g. spouse, civil partner, parents, children or siblings), you will still need cover unless you're a sole trader.
• Businesses using labour-only subcontractors: If you direct their work and provide tools or materials, they’re considered employees.

Employers’ Liability Insurance can cover subcontractors - but it depends on the type of subcontractor and your working relationship with them. Here’s the difference between Bona Fide Subcontractors (BFSC) and Labour-Only Subcontractors (LOSC).

Bona Fide Subcontractors (BFSC)

They are in business for themselves, not your employee, if most of the following apply:

• They quote for a job and agree a fixed price before starting.
• They decide how and when the work is done, without your direct supervision.
• They supply their own materials, tools and equipment.
• They employ and pay their own staff (if needed).
• They carry their own insurance - usually Public Liability and Employers’ Liability if they employ others.
• They are registered for self-employment, pay their own tax and National Insurance.
• They work for multiple clients, not just you.
• They bear the risk for profit or loss on the job.

If they tick most or all of these, they’re bona fide subcontractors and you generally don’t need Employers’ Liability insurance for them.

Important information: If a subcontractor’s own insurance fails or lapses, your insurer may still provide cover - but only if you can demonstrate that you took reasonable steps to verify their insurance was valid before work began.

Labour-Only Subcontractor (LOSC)

They’re treated like your employees, even if self-employed on paper, if most of the following apply:

• You tell them what to do, where to work and when.
• You supply all materials, tools and equipment.
• You pay them hourly, daily or weekly (not per job).
• They don’t work for anyone else while working for you.
• You cover them under your insurance.
• You take responsibility for their work quality and safety.

If you tick most of these, they’re labour-only sub-contractors and you must have Employers’ Liability Insurance for them.

Some businesses are exempt from requiring Employers’ Liability Insurance by law. These include:

• Sole traders with no employees: If you work alone and don’t hire anyone, you don’t need it.
• Companies employing only close family members: If you're not incorporated as a limited company, you may be exempt.
• Public organisations: Government departments and some public bodies are exempt under specific legislation.

If your new business employs any staff - even part-time, temporary, apprentices or volunteers - you’re legally required to have Employers’ Liability Insurance. The minimum cover required by law is £5 million, but most insurers provide £10 million as standard.

You still need Employers’ Liability Insurance even if your employees work from home - as long as they are considered employees under UK law.

Why it’s still required

• The legal obligation under the Employers’ Liability (Compulsory Insurance) Act 1969 applies regardless of where your employees work.
• If someone works under your direction or control - whether in an office, on a job site, remotely or from home - they’re considered an employee.

Risks still exist at home

• Employees can still suffer work-related injuries or illnesses while working remotely (e.g. repetitive strain injury or accidents during work tasks).
• You may be liable if the injury is linked to their work environment or duties - even at home.

Failing to declare remote work could risk:

• Claims being rejected or
• Cover being invalidated, if a home-based injury or incident occurs.

You should tell your insurer because:

1. It changes your risk profile - the insurer needs to know where work is being carried out and that it’s outside your usual premises.
2. Employer’s Liability (EL) still applies - even if employees work from home, you still have legal responsibilities for their health, safety and work equipment.
3. Public Liability (PL) and Business Contents cover may need to be updated - to protect company-owned equipment used at home (e.g. laptops, monitors, phones).
4. Some home addresses may need to be listed as additional work locations in your policy schedule.

What you should do

• Ensure home-working setups are safe and ergonomically sound.
• Provide guidance and support for remote working health and safety.
• Notify your insurer, including:
  • Approximate number of employees working from home
  • Advise whether the agreement is full-time or hybrid
  • Confirm any equipment provided by your business
  • Confirm that you have a home working risk assessment in place.

In the UK, Employers’ Liability Insurance is legally required for most businesses with employees and the law mandates a minimum cover of £5 million. However, most insurers provide £10 million as standard, which is often recommended for broader protection.

Legal requirement

• The policy must be issued by an authorised insurer.
• You must display your certificate of insurance where employees can see it - physically or digitally. Failure to do so can result in a fine being incurred.

When you might need more than £5 million

• High-risk industries like construction, manufacturing or logistics.
• Large workforces or multiple locations.
• Public sector contracts or clients that require higher limits.

Tip: If you're unsure, speak with your broker who can help you assess your risk profile and recommend appropriate cover. Over-insuring can be costly, but under-insuring could leave you exposed.

The cost of Employers’ Liability Insurance in the UK is influenced by your business’s risk profile, number of employees, industry type, claims history and cover limits. Premiums can range depending on the following factors:

Industry and risk level

• High-risk sectors like construction, manufacturing and logistics tend to pay more.
• Low-risk businesses such as consultancies or design firms typically benefit from lower premiums.

Number of employees

• More employees mean greater exposure to potential claims.
• Premiums scale with workforce size, especially if roles involve physical labour or hazardous environments.

Claims history

• A clean claims record can help to reduce your premium.
• Frequent or high-value claims may lead to higher costs or limited cover options.

Business turnover

• Higher turnover can indicate a larger operation, which may increase liability exposure and insurance costs.

Workplace safety measures

• Strong health and safety protocols, staff training and risk assessments can help to lower your risk profile - and may have a positive impact on your premium.

Cover limits

• The legal minimum is £5 million, but most insurers offer £10 million as standard.
• Higher limits may be required for public contracts or specific client demands, which can increase costs.

Policy excess

• Choosing a higher excess (the amount you pay toward a claim) may reduce your premium - but it must be affordable if a claim arises.

Location

Insurers may apply higher premiums to businesses operating in industries or regions with elevated accident rates or a higher likelihood of claims or legal action.

To help save money on Employers’ Liability Insurance, focus on improving workplace safety, using a broker to compare quotes from multiple insurers and choosing cover that matches your actual risk profile. The below strategies can help you to reduce premiums while keeping your business compliant and protected.

Improve workplace safety

• Implement strong health and safety protocols.
• Provide regular staff training and risk assessments.
• Fewer incidents mean fewer claims, which can help to lower future premiums.

Use a broker

• Brokers can help you to compare quotes from a wide panel of insurers to find suitable cover for your business.
• Brokers may have access to exclusive deals or policy terms that are not available when going directly to insurers.
• Brokers can also advise on appropriate cover levels, help to identify gaps in protection and assist with claims queries and renewals.

Tailor your cover

• Avoid over-insuring. Choose cover limits that reflect your actual business size and risk exposure.

Combine policies

• Combine Employers’ Liability with Public and Product Liability in a Combined Liability Insurance policy.
• Packaged policies may result in lower overall premiums and simpler policy management compared to buying policies individually.

Increase your excess

• Opting for a higher voluntary excess (the amount you pay toward a claim) can reduce your premium.
• Make sure it’s still affordable if a claim arises.
• If you have a history of frequent claims, this option may not be appropriate for you.

Pay annually

• Monthly payments may include interest.
• Paying annually can be more cost-effective over time.

Maintain a clean claims history

• Avoid making small claims if possible.
• A clean record often helps to secure better rates at renewal.

Maintain a Clean Claims History

• Avoid making minor claims where possible, as frequent low-value claims can increase premiums.
• A strong claims record demonstrates good risk management and can often help to secure better rates and terms at renewal.
• Consider covering small losses internally to maintain your no-claims record and build insurer confidence, where appropriate.

Review your policy regularly

• Keep your insurer informed of any changes to your business, such as reduced staffing levels, new operations or improved safety procedures.
• Regular policy reviews help to ensure your cover remains appropriate, identify gaps and can sometimes lead to premium reductions if risks have decreased.
• Reviewing annually (or after significant changes) helps to maintain compliance and accurate protection.

We understand that managing cash flow is important, which is why we offer flexible ways to pay for your Employers’ Liability Insurance policy. If you’d prefer not to pay the full amount in full, you can opt for a 50% deposit, with the remaining balance due 28 days after your policy begins – giving you time to spread the cost.

Alternatively, if monthly budgeting works better for your business, our third-party premium finance provider can offer convenient direct debit payments, allowing you to split the cost into manageable instalments (interest rates apply so this is more expensive than paying in full or in two instalments, please speak with our team for details).

The easiest way to get started is by speaking with our friendly commercial insurance advisors. They’ll guide you through the information our panel of insurers requires to provide an accurate quote and will be happy to answer any questions you may have along the way.

Call us

Head Office: 01227 285 540
Ashford Branch: 01233 222 562

Prefer to start by email? No problem – just drop us a message at ashford@qmtcommercial.co.uk and we’ll get back to you promptly.