How Much Employers' Liability Insurance Do I Need?

How Much Employers’ Liability Insurance Do I Need?

Legally a business needs a minimum of £5 million employers’ liability insurance cover. Businesses in higher-risk industries or those with a high number of employees may decide to take out more insurance.

If the minimum £5 million of coverage is not met, a business can be fined £2,500 every day without the protection.

Employers’ liability insurance is a legal requirement because it ensures a business has the funds available to recompense an employee should they become ill, injured, or die while at work. It covers legal fees and compensation payments. Compensation could be sought for medical expenses and other expenses incurred, loss of earnings and loss of future earnings, and financial compensation to deal with the mental and physical pain and trauma of the incident.

Employers’ liability insurance must cover every employee, but the cost of each additional employee is generally cheaper than the previous one.

Research by insurance experts NimbleFins found employers’ liability insurance can range from a cost of around £60 to hundreds of pounds a year per person depending on the profession.

One office-based worker will cost an average of £61, but this rises considerably for employees carrying out physical jobs.

An average employee costs around £213, according to NimbleFins’ analysis of hundreds of quotes for low, moderate and high-risk businesses operating across the spectrum from sole trader to limited companies. But this rises only to £753 when searching for cover for five employees – £150.60 per person.

Employers’ liability compulsory insurance regulations 1998

The Employers’ Liability (Compulsory Insurance) Regulations 1998 supplements the 1969 act. It requires businesses to hold at least £5 million of cover in employers’ liability insurance.

It also requires businesses to keep their insurance certificates for 40 years.

The law states a copy of the certificate must be displayed at each operational base where employees work. Not only must this be visible to staff, but also available for a Health and Safety Executive inspector to see when requested—failing to show proof to an inspector risk a fine of £1,000.

Since 2008, employers have been allowed to display their certificates electronically. Employers must ensure members of staff know how to find it and have reasonable access to it.

Under the act, employers’ liability insurance must be taken out with an authorised insurer. This can be checked on the Financial Conduct Authority Register.

The act stipulates when a worker is and isn’t considered eligible to be protected by employers’ liability insurance.

Employers’ liability insurance is typically needed if a business:

  • Supplies all equipment and materials for the worker to do the job.
  • Controls the hours and location someone works and how work is carried out.
  • Deducts national insurance and income tax from money paid to the worker.
  • Has a right to profit made (even if the business does not keep it all).
  • Treats the worker the same as other employees with the same working conditions for the same work.
  • Does not allow the worker to subcontract the job out to someone else of their choosing.

Employers’ liability insurance is not typically needed for workers who:

  • Are a close relative, i.e., husband, wife, civil partner, father, mother, grandfather, grandmother, stepfather, stepmother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother or half-sister. This exemption does not apply if the company is limited.
  • Do not work exclusively for the business.
  • Supply the majority of their own equipment and materials needed for the job.
  • Are based abroad and do not spend 14 continuous days or more in Great Britain (or seven continuous days on an offshore location).
  • Does not have national insurance and income tax deducted by the business. (If a worker is classed as self-employed for tax purposes but is classed as an employee for other reasons, the business still needs employers’ liability insurance).
  • Operates as a business for their personal benefit.


Minimum employers’ liability insurance

It is a legal requirement for a business to hold a minimum cover of £5 million of employers’ liability insurance. As such, most providers offer this as their standard rate. Businesses operating in riskier industries may decide to take out more cover.

If the minimum £5 million in the cover is not met, a business can be fined £2,500 every day without the protection.

Why do I need employers’ liability insurance?

Employers’ liability insurance is a legal requirement for almost all businesses hiring individuals to carry out work. The government sees it as an essential safeguard to employees in the workplace as it means a worker will always have access to compensation if they are injured or become ill from the work they do. The Health and Safety Executive fines businesses up to £2,500 for every day it does not have a policy. It is also essential for a business to display its insurance certificate in the workplace or digitally in a well-publicised and easily accessible place. Failure to prove a policy can also see a business fined £1,000.

The cost of compensation for an employee could run into the millions of pounds, and businesses are required to have a minimum cover of £5 million.

Incidents in Great Britain cost £16.2 billion in settlements in 2018/19, the Health and Safety Executive estimates. In 2019/20, 1.6 million people suffered a work-related illness while nearly 700,000 were injured. Another 111 people were killed at work.

Between April 10 2020, and March 13 2021, 367 deaths were reported to HSE from coronavirus alone. They were among 31,380 Covid-19 cases traced back to the workplace.

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