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  • Guide to Employers Liability Insurance

    Employers liability guide

    If you’re a limited company and you decide to take on employees, you’ll need to take out Employers’ Liability Insurance from the moment you make your first hire. Fail to do so and you’ll actually be breaking UK law, exposing yourself to fines in the region of thousands of pounds.

    So, what exactly is Employers’ Liability Insurance?

    Employers’ Liability Insurance is a type of business insurance that any UK company employing staff needs to have in place. It’s actually a legal requirement of businesses employing one or more workers in Britain, even if employees are only temporary or working free of charge as part of an internship or other voluntary arrangement.

    Why is Employers’ Liability Insurance important?

    As an employer it’s your responsibility to safeguard the health and wellbeing of those who work in your organisation while they’re performing their contracted duties. If an accident occurs in the workplace, and one of your employees is injured as a result, your company could be held accountable.

    Employers’ Liability Insurance is designed to protect your business and its assets in such instances, ensuring that you’re financially covered for any legal fees or compensation claims an employee may bring against your company.

    Do I have to take out Employer’s Liability Insurance?

    If you’re a company Director and your business employs workers within England, Scotland, Wales, Jersey, Guernsey, Northern Ireland or the Isle of Man, then yes you’re legally required to have Employers’ Liability Insurance.  

    This has been a legal requirement of businesses employing staff in British-governed territories since the government introduced the Employers’ Liability Compulsory Insurance Act in 1969. What’s more, for each day you fail to comply your business may be fined £2,500.

    Are there any exceptions?

    Yes, there are some circumstances in which Employers’ Liability Insurance isn’t automatically required. Your company may be exempt from Employers’ Liability Insurance if you:

    • Only employ close family members within your organisation (providing your business is not incorporated as a Limited Company).
    • Don’t employ anyone in your organisation (or you’re a sole trader).
    • If your employee owns a 50% or more share in the business.
    • If you and a 50/50 shareholder are the only workers in your organisation.
    • If your business is a public organisation, such as a branch of the government, a local authority or a police force.
    • Health services, such as the NHS and primary care trusts.
    • An organisation solely financed through public funding.

    Do I need Employers’ Liability Insurance if my workforce is unpaid?

    Employers’ Liability Insurance is there to cover anyone who works in your organisation, regardless of income or employment status. If you only have unpaid workers or volunteers working for your company, you still need to take out an Employers’ Liability policy.

    Similarly, you’ll also need Employers’ Liability cover if you use third party temps supplied by an agency, or contractors who work on location for your company. Essentially, anyone who is in your organisation for the purpose of supplying his or her services to your business will require you to take out Employers’ Liability Insurance.

    If you’re unsure whether you need Employers’ Liability protection, the following checklist provides useful insight into who is considered an employee under the Employers’ Liability Compulsory Insurance Act 1969:

    • Anyone who you pay a salary to and/or make national insurance and income tax deductions on behalf of.
    • Any individual performing a role in your organisation at a location and time you specify.
    • Anyone working with equipment, tools or materials provided by your company.
    • Anyone who generates profit for your organisation.
    • Anyone working for your organisation who is unable to nominate a substitute to perform his or her services.
    • Anyone undertaking the same work, under the same conditions, as a paid member of staff in your organisation.

    Does Employers’ Liability cover claims made by ex-employees?

    Just because someone leaves your company doesn’t mean they are no longer your responsibility. It’s not uncommon for ex-employees to take legal action against past employers in circumstances where their employment terminated years earlier.

    This is because some symptoms or ailments take time to manifest, at which point the employee may no longer be working within the organisation. If he or she can prove the injuries they’ve sustained have materialised as a direct consequence of the work they performed at your company they may still have a case under UK law to make a monetary claim for compensation.

    Most Employers’ Liability Insurance cover does extend to claims arising from past employees, however it’s best to confirm this with your insurer and check the terms of your policy if in doubt.

    Is there a minimum threshold for Employers’ Liability Insurance?

    Yes, you must have insurance cover of at least £5 million, but you may find it makes greater financial sense to take out a higher level of protection depending on the nature of your business’s liabilities.

    If you own a group of businesses that employ people, it’s possible to take out a single Employers’ Liability policy that covers you at group level, rather than unique policies for each individual company. Again, the minimum threshold of £5 million still applies in this case.

    How much does Employers’ Liability Insurance cost?

    How much you’ll have to pay for Employers’ Liability Insurance is relative to your business’s requirements. An insurer will ask a number of questions about your organisation and its employees in order to determine the level of protection needed and how much the annual premiums will cost.

    Factors that affect your policy’s price may include:

    • The number of people your company employs.
    • The nature of work your company undertakes.
    • The conditions of your employees’ place of work.
    • Whether you’ve previously made a claim on an Employers’ Liability policy.


    These factors and others will be taken into consideration by the insurer in order to determine the level of risk facing your business. As a general rule of thumb, the higher the risk, the more you’re likely to pay for the Employers’ Liability Protection your business needs. However, it’s important to be honest and not deliberately withhold information when questioned, as this can affect your ability to make a claim down the line.

    Do I need Employers’ Liability cover for overseas employees?

    Employers’ Liability insurance only extends to employees who are physically working for your company in locations governed by the Employers’ Liability Compulsory Insurance Act 1969. As mentioned previously, these include all of the UK and Northern Ireland, Guernsey, Jersey and the Isle of Man.

    Legally, you don’t need Employers’ Liability Insurance for employees based outside of this jurisdiction, so if all of your company’s employees are based abroad this may exempt you. However, to be safe, it’s best to investigate local employment law in the countries your employees are located to ensure your business is being compliant.

    Likewise, if an employee works in the UK for 14 days or more, or spends more than seven days offshore, legally, Employers’ Liability Insurance will be required.    

    How do I get Employers’ Liability Insurance?

    As always with business insurance, it’s best to speak directly to an FSA-regulated insurer before taking out any policy, to guarantee the best premium and cover for your unique circumstances.

    Speaking with a broker, rather then comparing quotes online ensures you end up with a watertight policy that’s comprehensive enough for your needs – something that’s integral to protecting your business from financial hardship should the worse should arise.

    For further reading here are eight things you should know about Employer's Liability Insurance.

    Want to find out more about Bluedrop's Liability Insurance?
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