Do I need employers' liability insurance?
Is employers' liability insurance a legal requirement?
If your business has employees, chances are you'll need employers' liability insurance. That's because it's a legal requirement in the UK for most businesses, with employers needing to have at least £5 million of cover.
There are, however, some exemptions, such as those who only employ close family members. But there are certain conditions that enforce the exemptions. Read on to find out the details and whether you need employers' liability.
Do I have to have employers' liability insurance?
If you employ people, regardless of whether they're full-time, part-time, temporary, contractors or apprentice workers, you legally must have employers' liability cover in the UK.
Without it, you could be fined up to £2,500 for each day that you were operating without employers' liability. There are a few exemptions, but most of the time you'll need to have it if you have employees.
You could also be fined up to £1,000 if you fail to present your employers' liability certificate if requested by the HSE. Most businesses choose to display their certificates on their business premises, so that employees can see it, too.
Even if you're one of the few who are exempt, this type of cover can come in handy if an employee makes a claim against you due to work-related injury or illness. Compensation costs and legal fees can make a serious dent in your finances, and without employers' liability you'd have to pay those fees out of your own pocket.
Do I need employers’ liability insurance as a director?
If you are employed by a company as a director, you are technically an employee and therefore do not need employers' liability cover.
If you own a company and are the sole shareholder and appointed director of that company, who owns over 50% of the shares and has no other employees, you do not need employers' liability insurance. However, keep in mind that some clients or businesses will only work with you if you do have it.
Do I need employers’ liability insurance for self-employed staff?
The HSE defines an employee as someone who you employ under a verbal or written contract of service or apprenticeship, regardless of what you call them or what their tax status is. The UK law states that an employee contract can be expressed or implied, so even if it's not in writing, you still need to have the required level of cover.
The definition of an employee can include:
- If you deduct national insurance and income tax from the money you pay them
- If you control where and when they work
- If you supply the majority of the equipment they use
- If they work exclusively for you
- If they cannot employ a substitute if they are unable to work
- If they do the same work as other employees and work in the same conditions
Under this definition, if you employ freelancers who work for you remotely, use their own equipment and you don't employ anyone else, the HSE may not fine you for not having employers' liability insurance. This is because you're not in control of their working environment and work-related health and safety issues.
If you're unsure of whether you need employers' liability insurance, we'd recommend getting cover just in case or having a chat with us – we'll be able to help.
Do you need employers’ liability insurance for self-employed volunteers?
The HSE states that you do not need employers' liability insurance for volunteers if it's just for a short time. But if you have an existing policy, you should be covered for volunteers anyway, which is helpful in case a volunteer did make a claim. If you're planning to take on volunteers for a longer periods, you may need employers' liability and to inform your insurer that they're now part of your team.
Do I need employers’ liability insurance if I’m a limited company with one employee?
Yes. Any business that's incorporated as a limited company and has any number of employees, no matter if it's 1 or 100, needs employers' liability insurance.
Do sole traders need employers’ liability insurance?
If you're a sole trader and work by yourself or only employ close family members, there's no need to get employers' liability insurance, unless a contract requires it.
Do I need employers liability insurance for subcontractors?
This depends on the type of subcontractor you're employing. There are two types:
- Bona-fide subcontractors: those who work under their own direction and provide their own working materials, including tools.
- Labour-only subcontractors: those who work under your direction and use materials supplied by you.
Under these definitions, you do not need employer's liability insurance for bona-fide subcontractors, but you will for labour-only subcontractors. As a rule of thumb, any instance where you are in control of your workers health and safety requires employers' liability insurance.
Do I need employers liability insurance for family members?
If you employ immediate members of your family, you are exempt from purchasing employers' liability insurance.
- A spouse such as your husband, wife or civil partner
- Siblings, including half-brothers and sisters
- Step-siblings and step-children
However, if you have a limited company, this exemption does not apply and you will need to have cover for employees, even if they're family members.
Do I need employers liability insurance for work experience?
Public liability will cover theft if it's the theft of someone else's property that you are responsible for. If you’re worried about your own property, on the other hand, you’ll need to consider business contents insurance.
If you're not sure whether you need employers' liability insurance, feel free to get in contact with us and we'd be happy to talk it through with you. Alternatively, you can view the HSE's guide for employers.