Employers' Liability Insurance
Employers' liability covers compensation and legal costs when somebody who works for you is injured or made ill by that work. Unlike almost every other commercial cover, it is required by law, and the law is specific about it.
Who Counts As An Employee
The Employers' Liability (Compulsory Insurance) Act 1969 requires most businesses with employees to hold at least £5 million of cover. The market standard is £10 million, which is what nearly every policy is written at, because the difference in premium is marginal and main contractors routinely ask for it.
The part that catches businesses out is not the limit. It is who counts as an employee, and the answer is wider than most people expect.
What Employers' Liability Insurance Covers
Injury at work
Compensation where an employee is hurt doing their job and the business is found liable. Falls, machinery, manual handling and vehicle movements on site account for most of what we see.
Work related illness and disease
Claims for conditions caused by the work rather than by a single accident. Hand arm vibration, noise induced hearing loss, dermatitis and respiratory disease. These often arrive many years after the exposure, which is why old certificates matter.
Legal defence costs
The cost of defending the claim, including representation at inquests and in civil proceedings brought by an employee or their family.
Labour only subcontractors
People working under your direction, with your tools or materials, on your methods. They are treated as employees for this cover, must be declared, and are rated as wageroll.
Where The Cover Stops
Wordings differ between insurers, so treat these as the usual position rather than as universal fact. Where one of them matters to you, it is worth checking on your own schedule before you need to.
Criminal fines and penalties
Employers' liability pays civil compensation. It does not pay fines imposed by a court or by the HSE, which are not insurable in the UK. Some policies include legal representation at a prosecution, which is a different thing from paying the fine.
Bona fide subcontractors
A genuine subcontractor who carries their own liability cover, works to their own methods and prices their own work is not your employee. Their injuries fall to their own insurance. You should hold their certificate.
Injury to the public
A claim from somebody who does not work for you falls to public liability. The two sit side by side and most packages include both.
Undeclared activities
The cover follows the business you described. A firm that declared ground floor work and had somebody fall from a scaffold on the third storey will have a difficult conversation, regardless of the limit held.
The Legal Requirement, Precisely
You must hold at least £5 million of employers' liability cover. Policies are almost universally written at £10 million because the additional premium is small and many contracts specify it.
The penalty for not holding cover is up to £2,500 for every day you are uninsured. There is a separate penalty of up to £1,000 for failing to display the certificate or make it available to inspectors. A certificate can be displayed electronically as long as employees know where to find it and can access it.
Employers' liability claims can arrive decades after the exposure that caused them, particularly for disease. The requirement to retain certificates for forty years was removed in 2008, but keeping every certificate you have ever held remains strongly advisable, because a claim in 2040 for an exposure in 2026 will need you to prove who your insurer was.
The Exemptions Are Narrower Than People Think
There are two exemptions people commonly reach for and both are narrower than the version that gets repeated in the pub.
A limited company with only one employee, where that employee owns fifty per cent or more of the share capital, is exempt. The moment you take on a second person, including a part timer or a labour only subcontractor, the exemption is gone. Most one person limited companies that take on occasional help are uninsured without realising it.
A family business is exempt where every employee is a close relative of the employer, but this exemption does not apply to limited companies. If you have incorporated, you need the cover, even if the only people working in the business are your own family.
Why Your Wageroll Is The Price
Employers' liability is rated on wageroll rather than turnover, split by the kind of work each group does. Office and clerical staff are rated at a fraction of the rate applied to someone working at height, and insurers will want those figures separately rather than as one total.
This is why declaring accurately pays. Lumping everybody in at the manual rate overcharges you, and lumping manual workers in at the clerical rate produces a premium adjustment at audit plus an argument at claim time.
Labour only subcontractor payments go into the wageroll too. The most common underinsurance we see is a contractor declaring four employees and paying six labour only subcontractors through the year without mentioning them.
What Moves The Price
We do not publish a starting price for this cover, because a figure that is not drawn from a policy we actually placed is worth nothing to you. What we can tell you is what the premium is built from.
- Total wageroll, split between manual and clerical
- What the manual staff actually do, especially at height
- Payments to labour only subcontractors
- Trade and the risk profile that goes with it
- Claims and reported incidents over the last five years
- Health and safety documentation, for larger wagerolls
We are a broker, so we take it to several insurers rather than quoting one. Call 02382 000820 and you will have a real figure rather than a range.
What We Need To Quote
- Number of employees, split by what they do
- Annual wageroll, manual and clerical separately
- Annual payments to labour only subcontractors
- Annual payments to bona fide subcontractors
- Any employers' liability claims or reported incidents in five years
- Maximum working height, and whether any work is below ground
Cover that often goes with this
The gaps we most often find sitting next to this policy.
- Public liabilityThe other half. Claims from the public rather than from your own staff.
- Contractors combinedPuts employers' liability, public liability and the rest on one policy.
- Legal expensesEmployment disputes and HSE representation, which this policy does not pay.
- Tradesman insuranceThe trade version of this, with tools and van cover built around it.
- All trades A to ZCover written for your specific trade rather than the general product.
- Talk to a brokerTell us what you do and we will say which of these you actually need.
Common questions
Is employers' liability insurance compulsory?+
Yes, for most businesses with employees, under the Employers' Liability (Compulsory Insurance) Act 1969. The statutory minimum is £5 million, though policies are usually written at £10 million. Penalties run to £2,500 for each day you are uninsured.
Do I need it if I only use subcontractors?+
It depends what kind. Labour only subcontractors work under your direction and count as employees for this purpose, so you need cover. Genuine bona fide subcontractors who carry their own insurance and work to their own methods do not count, but you should hold evidence of their cover.
I am the only director and employee. Am I exempt?+
If you are a limited company with one employee who owns fifty per cent or more of the shares, yes. That exemption ends the moment anybody else works for the business, including a part time helper or a labour only subcontractor for a single day.
Does my family business need it?+
If you are not a limited company and every employee is a close relative, you are exempt. If you have incorporated, the exemption does not apply and you need cover even if everybody working there is family.
Why is £10 million standard if the law says £5 million?+
Because the extra premium is small and the market has settled there. Many main contractor and public sector contracts specify £10 million, so a £5 million policy can cost you work even though it satisfies the law.
How long should I keep old certificates?+
Indefinitely. The forty year retention rule was removed in 2008, but disease claims routinely arrive decades after the exposure, and without the certificate you cannot show who was on risk at the time. Keeping a scan of every one costs nothing.
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