How are employers’ liability costs calculated? 

Making sure you tick all the correct legal boxes is essential as an employer. But so is knowing the different factors that feed into the cost of employers’ liability (EL) insurance. 

Before getting a quote, it's useful to know why insurers ask the questions they do. And why answering them as honestly and accurately as you can means you get the most out of your insurance.  

We'll get into what info you're likely to need to give and why here. But first, let’s cover the basics of what EL is and why you need it in the first place. 

Do I need employers' liability insurance for my staff? 

Hiring your first employee is a big milestone. It usually means your business is growing, which is great news.  

But it also comes with extra responsibilities and a few new things to think about. Like whether you’d need to get employers’ liability (EL) insurance for your new staff member. 

Employers’ liability insurance is legally required if you employ staff in the UK. It covers claims where employees (or former employees) say they’ve fallen ill or become injured because of their work.  

EL covers the legal costs of such claims and any compensation you may owe them. 

Examples of claims include: 

• An employee injuring their back while lifting something heavy. 
• An office worker tripping over some exposed cables and breaking their ankle. 
• A contractor getting sick after being exposed to hazardous chemicals. 

‘Employees’ don’t just have to mean full-time staff on your payroll either. The Health and Safety Executive (HSE) consider a wide range of people who work for you to be your employees. Including freelancers, volunteers, work experience students, and contractors under your supervision.  

There are a few exceptions, such as businesses who employ close family members and companies where the only employee is the business owner.  

But other than those, most businesses with employees will probably need EL cover. 

If the HSE come knocking and you’re caught without it, you can be fined up to £2,500 each day you were supposed to have it.  

Plus, another £1,000 for not displaying a valid insurance certificate where your employees can find it easily.  

For more on what EL covers, take a look at our in-depth guide to employers’ liability insurance.  

How are your employers’ liability costs calculated? 

Insurers consider several different factors when assessing the cost of your employers’ liability insurance. This helps them work out two things: how likely you are to claim on your insurance and how much that claim could cost.  

To do that, they might ask about: 

1. Your business activities 

It figures the greater the risk of injury to one of your employees, the more your EL insurance might cost. 

As a general example, most office-based businesses can expect to pay less for their employers’ liability insurance than ones in retail or hospitality. While businesses involved in constructure or manufacturing might find their EL costs significantly more.  

It's important to remember that insurers consider a range of factors when calculating the cost of employers' liability insurance. And depending on what your business does, your business activities may or may not influence the cost of your EL. 

2. Number of employees and payroll 

When buying employers' liability insurance, insurers will usually want to know how many people you employ and what your total employee payroll is.  

It's important to tot your staff up properly. For some insurers, having more employees can mean you pay a bit more towards the cost of your employers' liability insurance (that includes work experience students, interns, and apprentices).  

Remember, agency workers don’t count as employees if their agency covers their EL for them. Make sure to double-check if that’s really the case before ruling them out.  

3. Claims history 

Lastly, your insurer will want to know about any claims you've had in the past. 

This might mean you end up paying a bit more for your employers' liability insurance. But it's important you don't gloss over any details. You could end up invalidating your cover if you do.  

This means keeping records of any accidents. As well as making sure you’re carrying out risk assessments, have health and safety policies in place, and provide your staff with appropriate training.  

How much employers’ liability cover do I need? 

By law, you must have a minimum of £5 million employers’ liability cover for your staff. However, most insurers offer £10 million as standard. 

In either case, you won’t pay significantly more for £10 million of cover than you would for £5 million. It’s simply the amount most insurers offer. 

Serious workplace injuries and long-term illnesses, and all the legal costs associated with them, can stack up quickly. With some EL claims running up to hundreds of thousands of pounds. 

Should I tell my insurer if I’m hiring more staff? 

As we've mentioned before, taking on more employees can sometimes mean you end up paying a bit more towards the cost of your insurance.  

Either way, it's a good idea to let your insurer know if you hire more people or if your business changes direction. They may want to check your payroll again and whether your business activities have changed.  

Rest assured, the questions insurers ask when you’re getting your quote with them aren’t intended to catch you out or dramatically affect the cost of your insurance.  

Assuming you get the standard £10m amount of employers’ liability cover most insurers offer and you keep your insurer updated about any significant changes over the policy year, you can feel confident your business will be protected. 

Is there anything else I need to know? 

Although you can sometimes buy EL on its own, many insurers choose to package it alongside other products - like public liability (PL) insurance. In some cases, this is cheaper than standalone EL. 

PL is a perfect partner to EL as it also covers injuries and illnesses at work. However, these are ones inflicted by your business on clients, suppliers, members of the public, and other people who aren’t your employees.  

Apart from that, a good broker who knows your industry will be able to help with any questions you have. You can rely on them point you towards the most suitable cover. And if something doesn’t look right, you can always ask them for help.  

Need help navigating how to buy EL? Give us a call on 0345 222 5391 or head over to our employers’ liability insurance page.

Image used under license from iStock.