What is employers liability insurance?

In most cases, if you have someone working for you, the law requires you to have employers’ liability insurance. Here’s what you need to know about this type of insurance.

What is employers’ liability insurance

Despite your best efforts workplace accidents can still happen. There are around 144 deaths and 621,000 injuries* at work each year in the UK. The proliferation of no-win, no-fee lawyers means that it’s never been easier for workers to make claims against their employers.

Employers’ liability insurance is designed to protect you against compensation claims made by employees for injury or damage to health. Employers’ liability insurance usually covers:

the cost of compensation
any associated legal fees.

* Source Health and Safety Executive 2016

What sorts of claims can employees make?

Here are some examples of incidents that can trigger claims for compensation.

Imagine if the employers of these people did not have employers’ liability insurance. Paying damages and legal fees could have a severe impact on their businesses and could even bankrupt them. That’s why the law requires most businesses to have this type of insurance – to protect not only the employees, but also the businesses themselves.

Samina – office worker

Samina was walking to the photocopier when she tripped over a loose carpet tile, falling heavily and breaking her wrist. Samina made a claim against her employer who defended themselves by saying that the tile had only just come loose and that no one had reported it. However, the court found in favour of Samina and ordered the employer to pay over £3,000 for her injury, plus legal costs.
Carl – warehouse worker

Carl was involved in an accident with a forklift truck being driven by his employer in which Carl lost part of a finger. He made a successful claim against his employer who admitted responsibility and was ordered to pay £4,000 for Carl’s injury.
Jason – engineer

Jason has worked in a light engineering workshop for a number of years. He started to notice a numbness in his hands, which a medical specialist diagnosed as ‘white finger’, a condition caused by vibrating machinery. Jason made a claim against his employer who defended themselves on the grounds that they took reasonable steps to protect Jason’s health and safety. The court disagreed and ordered the employer to pay Jason £20,000 for the damage to his health.
Jaz – apprentice hairdresser

Jaz was preparing some hair colouring chemicals when she got some in one of her eyes. She was rushed to hospital but her eye suffered permanent damage. Jaz decided to made a claim against her employer. The employer said that it was Jaz’s fault for not sticking to the correct safety procedures. But the court disagreed and decided that Jaz had received inadequate health and safety training. The employer was ordered to pay £30,000 compensation to Jaz and also to pay her legal fees.

Which businesses are exempt from employers’ liability insurance?

Very few businesses are exempt from the requirement to have employers’ liability insurance. The main cases where you do not need this type of insurance are if you:

are a sole trader with no employees
run an unincorporated family business in which all of your employees are closely related to you
are the only employee and own 50% or more of the share capital of the company.

To check if your business is exempt from employers’ liability insurance see the Health and Safety Executive (HSE) website.

How much employers’ liability cover do I need?

You need at least £5 million of cover, although many insurers offer a minimum cover of £10 million. You are also required to display a certificate of the insurance where your employees can see it (printed or online).

Who should my policy cover?

Type of Employee	Who should be covered
Permanent	There are a number of criteria that distinguish employees from other types of workers, two key ones being that: 1) they have income tax and National Insurance contributions deducted from their salary 2) their location, conditions and hours are controlled by you, the employer.
Short-term	These include contract, seasonal and casual employees.
Labour-only subcontractors	These are sub-contractors who do not provide their own materials and tools normally, and who work under your direction. Don’t confuse these with bona-fide subcontractors who will usually work under their own direction, use their own tools and materials and crucially have their own insurance.
Temporary staff	These include students, people on work placements and volunteers.

How much does employers’ liability insurance cost?

This will depend very much on the type of business you operate and the potential risks in the work your employees undertake. People tend to buy a combined packages of insurances – such as employers liability, public liability and professional indemnity – so you’d rarely know what the precise cost of each type of insurance is.

A variety of polices are offered by insurance providers and brokers, who will assess the amount of insurance cover your business is likely to need and what would be covered in cases of claims being brought against you.

A no-claims discounts is applied to some policies. These discounts recognise businesses that manage potential risks well and have effective health and safety procedures, resulting in fewer claims.

Where can I buy employers’ liability insurance?

You can buy employers’ liability insurance direct from insurance providers or through intermediaries such as brokers or trade associations.

Employers’ liability insurance is sometimes included in an insurance package designed to cover a range of business needs. For instance, some insurers combine it with public liability insurance.

To check that an insurer is properly authorised check the website of the Financial Conduct Authority (FCA).

What are the penalties for not having employers liability insurance?

The penalties for not having this insurance are severe – you can be fined up to £2,500 for each day that you don’t have the insurance in place.

Consider the following scenario. An employer does not have employers’ liability insurance and one of their staff develops an illness which a court decides is due to negligence on the part of the employer. Not only does the employer have to pay damages and legal costs, but they also must pay the fines for not having the right insurance – this could potentially total hundreds of thousands of pounds.

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