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Does a business always need employers’ liability insurance?


Does a business always need employers’ liability insurance?

Good question, but first as an employer it’s important to understand your legal responsibilities.

Generally, having employers’ liability insurance in place is a legal requirement for any business with employees.

You only need to have one other person as an employee, even if they are on a temporary contract, as failure to have appropriate cover could incur fines of up to £2,500 a day until you take out a policy.

In the UK we have an Act of Parliament called the Employers’ Liability (Compulsory Insurance) Act 1969 and it requires that a business (however small or large) has insurance in place to a minimum cover of at least £5 million.

There are however some exceptions, which are:

  • Family businesses where all the employees are closely related such as husband and wife, brother and sister, civil partners, mother, father, grandparents, grandchildren, stepparents, stepchildren, half siblings etc. (Unless incorporated into a limited company)
  • A business employing only the owner where that employee owns over 50% of the issued share capital.
  • Public organisations such as the Police Authority, government departments and agencies, local authorities.
  • The NHS including trusts
  • Organisations financed through public funds such as transport executives and magistrate court committees.
  • Independent contractors who are clearly employed by another organisation whereby they issue you an invoice and you don’t pay them directly or take any stoppages from them.
  • However, be aware of subcontractors who are ‘labour- only’ working under your direction and using your tools and materials. These are regarded as legal employees and will require cover by your insurance. As ever, it’s important to check with a qualified and registered insurance advisor when contractors are involved, as circumstances can vary.

Who needs employers’ liability insurance?

Any business with even one employee should possess employers’ liability insurance. Even if you only hire staff on a temporary or unpaid basis such as volunteers and work experience, you are still required to cover them in case they were to have an accident or fall ill due to work.

The following criteria acts as a good rule of thumb as to whether they should be afforded cover.

  • The business deducts tax and national insurance from the money it pays the worker
  • The business has the right to exercise control over the type of work the person carries out and when and where they do it.
  • The business makes a profit out of the works supplied.
  • The business supplies the tools and materials.
  • The person cannot supply a substitute to carry out the service.
  • The person is afforded the same treatment as other workers doing the same work in the same building.

Further Information

  • The full article on Employers Liability Insurance for business can be found at our Health and Safety blog (
  • The official HSE leaflet can be downloaded free of charge HERE
  • The latest information on this topic can be found at
  • Advice about whether a person is an employee can be found by contacting a solicitor, visiting a legal centre or a Citizens’ Advice Bureau


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