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    Protection if someone is injured or their property is damaged because of your business.

    • Public Liability Insurance
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What our Nerds say about employers' liability insurance

HOLLY

INSURANCE NERD

Employers’ liability insurance safeguards your business against compensation costs and legal fees if an employee is harmed because of the work they do. It can also cover medical expenses and loss of earnings that result from their injury or illness.

This cover is a legal requirement for most businesses with employees, with only a few exceptions. It will cover claims made by current, full- or part-time employees, apprentices, temporary staff, casual and seasonal workers, interns and volunteers, as well as former employees.

What is employers’ liability insurance?

Employers’ liability insurance pays compensation costs and legal fees if an employee is ill or injured due to their work and makes a claim against you.

As well as having a duty of care for employers, it’s compulsory for businesses with employees to have employers’ liability cover. There are only a few exceptions, such as if you employ only family members or if your staff work abroad.

It isn’t just for permanent staff. You should also have cover for work carried out by casual and contract workers, including volunteers.

Why have employers’ liability insurance?

There are some reasons you may take out employers’ liability insurance:

  • Your business is responsible for the health and safety of any employees while they are at work.
  • It’s a legal requirement for most businesses with employees to have a minimum level of this type of cover.
  • It protects your business from the potential high legal and compensation costs if an employee is ill or injured because of their work and takes legal action.
  • It also covers your business for previous staff who may have developed a condition as a result of work they did for you.

This also includes employees working off site and if they are working from home.

What does employers’ liability insurance cover?

If someone who works for you is ill or injured because of their work, employers’ liability insurance will help cover the cost of a claim going to court and compensation payouts.

This can include legal costs of attending court to defend a claim as well as compensation payments, up to a maximum amount.

A policy may also include cover for related medical bills and even lost income if an employee is unable to work due to their condition.

You must have at least £5 million of cover, though you can choose a higher level of cover if your business needs it. Most insurers offer at least £10 million of cover as standard.

How does employers’ liability insurance work?

Once you have taken out employers’ liability cover, your business is insured up to the maximum amount defined in your insurance policy if an employee takes action against you.

If an employee is ill or injured after working for you, you should contact your insurer as soon as possible. This applies whether the incident has just happened or if they have made a claim against the business. Don’t negotiate or talk about settlements with your employee before contacting your insurer.

If the employee is awarded compensation, the insurer should step in to cover compensation costs that are ordered by the court as well as agreed legal fees.

Do you need employers’ liability insurance?

If your business is based in England, Scotland or Wales and has employees, employers’ liability insurance is a legal requirement. In Northern Ireland, it’s called employers’ liability compulsory insurance (ELCI).

However, there are a few exceptions when it is not mandatory:

  • If your employees are based abroad. But check the rules in the country where they are based for any requirements there.
  • If your business isn’t a limited company and you only employ close family members.
  • If it’s a limited company with one employee who owns more than half of the shares.
  • If you are a sole trader business owner with no employees.

What happens if you don’t have employers’ liability insurance?

If you don’t take out employers’ liability cover for at least £5 million and aren’t exempt from this type of cover, you are breaking the law. Health and Safety Executive inspectors can check if you have this cover and ask to see proof.

If your business is found not to have cover, you could be fined up to £2,500 for each day you don’t have the necessary insurance. You must also display the certificate or make it easy to access online, or you will have to pay a £1,000 fine.

If you’re in any doubt about your responsibilities as an employer with this type of cover, this Health and Safety Executive guide will help.

How much employers' liability cover will you need?

Legally, a business with employees must have at least £5 million of cover, but your specific business may require a higher level of cover, based on the type of risks your employees might face. The majority of policies offer £10 million worth of cover.

Although it might seem hard to predict, bear in mind that compensation and legal costs for harm through work could reach five figures.

How much does employers’ liability insurance cost?

Your insurance premiums for employers’ liability insurance depend on a few factors, including your sector, number of employees and your insurance claims history.

The specific risks the business and its employees are exposed to may also affect your premiums. The insurer may also take your business’s health and safety record into account.

Some insurers offer a discount for a new policy if you are already a customer. To get the best deal for your business, compare a few providers so you get the most appropriate cover for the best price, rather than taking the first quote you get.

How to get employers’ liability insurance

To get a quote for this type of business cover, the insurer or broker will need some personal information and details about your business. This will usually include:

  • number of employees
  • how long you business has been trading
  • if you have business premises
  • the businesses’s trade or sector
  • annual turnover or income
  • past claims information

Once you’ve compared offerings from insurers, you can apply for cover.

Can you get employers' liability insurance as part of your business insurance?

Yes. Employers’ liability insurance is just one type of business insurance, which you can buy with other types of cover, such as:

  • public liability insurance
  • product liability insurance
  • professional indemnity insurance

If you use our quote tool, you can ask for a quote for other types of cover at the same time. Make sure you read your policy in detail to ensure your business insurance is covered.

» COMPARE: Business insurance

How to choose the best employers’ liability insurance for your business

Check the product information so you are clear on what’s covered and what isn’t, and if it’s right for your business. Affordability is important, but it must provide the right level of cover for your company’s needs.

You might also want to consider:

  • What customers say about its customer service on review sites.
  • If there is a 24-hour legal helpline.
  • Whether it’s easy to manage your policy online.
  • If you can pay in monthly instalments, and if interest is charged if you do.
  • If you will be charged admin fees for making changes to your policy.
  • How quickly the insurer deals with claims settlements.
  • Whether there is any extra business support available alongside your policy.

Employers’ liability insurance FAQs

Do I have to have employers’ liability insurance?

If your business has employees, it’s a legal requirement to have this type of business insurance. This includes permanent, casual, temporary, full-time or part-time staff, and labour-only sub-contractors.

It’s usually considered that you have employees if you deduct National Insurance and income tax from their pay and decide their working hours, place of work and conditions.

Employers’ liability insurance may not be mandatory if you only employ family members or if your business is a limited company with one employee who owns more than half of the shares. You also don’t need it if your employees are based abroad, unless they spend 14 or more consecutive days working in Britain, or seven or more days on an offshore installation. However, just because it isn’t mandatory doesn’t mean that you should not consider it.

Do I need employers' liability for self-employed staff?

No. You only need employers’ liability insurance for staff you employ. Self-employed staff may want to consider their own liability cover, though.

This might include employer’s liability cover if they employ other people, or public liability cover to protect them from the cost of claims by members of the public for injury and loss or damage to their property caused by their business.

Do I need employers’ liability insurance if I have no employees?

No, you don’t need to take out employers’ liability cover if you don’t employ anyone to work for you.

Do I need employers’ liability insurance for volunteers?

If you use volunteers to help with your business and already have an employers’ liability insurance policy, you may be covered for them. If you take on volunteers for long periods, let your insurer know so you’re sure that they are included in your cover.

If you don’t have any employees but use volunteers, they could still make a claim against your business. So you may want to consider taking out an employers’ liability insurance policy to cover them.

If your volunteers work for a charity, the charity is legally required to have employers’ liability cover for them. Charities have a duty of care towards their employees and volunteers.

Does employers’ liability insurance cover contractors?

You won’t need cover for self-employed, independent contractors who use their own equipment and tools, and work for other businesses as well as yours. They may need to have this type of cover for their own business, if they employ staff.

However, if your business takes on labour-only sub-contractors who use equipment or tools belonging to your business, and are part of your team for any period, you will need cover for them. Their health and safety is your business’s concern, and they are considered employees.

Does employers’ liability insurance cover working from home?

If you have employees who work off site or from home, you will need employers’ liability cover for them. Your business is responsible for the health and safety of employees while they work, whether they are in the office, off site or working from home.

Whether a policy covers this may depend on the insurer, though. So check the policy documents to make sure employees who work from home or remotely are covered. Once you have employers’ liability cover, let your insurer know if staff begin remote working.

Do sole traders need employers’ liability insurance?

If you are a sole trader and only work for yourself, you don’t need to have employers’ liability insurance. Companies that have no employees are not required to have this type of cover.

Sole traders may want to consider other types of business insurance, though, such as public liability insurance or professional indemnity cover.

Is employers’ liability insurance a legal requirement?

If you employ staff, you must have employers’ liability insurance for at least £5 million, unless you are exempt from it under the Employers’ Liability (Compulsory Insurance) Act 1969.

It’s a legal requirement and if you don’t have a current, valid policy, your business could be fined.

Is employers’ liability the same as professional indemnity?

No. Both are types of business insurance that protect your business from legal and compensation costs if someone makes a claim against you, but they cover different situations.

Professional indemnity insurance relates to the services your business provides to clients. It covers the cost of claims from a client if your advice or services are found to be negligent, inadequate or cause damage to your client.

Unlike employers’ liability cover, it isn’t a legal requirement. However, professionals, such as engineers and accountants, and some professional membership bodies, require practitioners to have this cover.

» COMPARE: Professional indemnity insurance

Is employers’ liability insurance the same as public liability insurance?

No. Public liability insurance protects your business from legal and compensation costs if a member of the public is injured or their property is damaged and they make a claim against your business. This includes visitors, clients, passers-by and event participants.

While employers’ liability insurance is also concerned with claims for injury and illness, it is only for claims from your employees. It is also a legal requirement for most businesses, while public liability cover is usually optional.

» COMPARE: Public liability insurance

How long do you need to keep employers’ liability insurance certificates?

It used to be the case that certificates had to be kept for 40 years, by law. This requirement was removed in 2008.

Even so, it’s a good idea to keep all your employers' liability certificates. This is so that you have a complete record, in case former employees make a claim against your business.

About the author

Holly champions clear, jargon-free writing. She’s been creating finance content for leading organisations for over 10 years. Read more

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