What is employers’ liability insurance: a complete guide

If you have employees, you’ll usually need employers’ liability (EL) insurance.  

It protects your business if someone who works for you gets ill or injured at work. And supports your staff if you owe them compensation.

It's a legal requirement for most UK businesses. And that makes being clued up on it extremely important.  

Fortunately, EL is something we do know all about. In this guide, we’ll explain: 

• what employers’ liability insurance is 
• who needs it 
• the types of claims it covers 
• how much it costs 
• what the claims process looks like, and more. 

What is employers' liability insurance?

Employers' liability insurance covers your business if an employee (or former employee) claims for injuries and illnesses they’ve suffered because of their work.

It pays any compensation awarded to them and covers your legal costs, too.

It's especially important because it’s the only business insurance required by law. It's also our third most-requested type of cover after professional indemnity insurance and public liability. 

Who needs employers' liability insurance?

It’s safe to say most UK businesses that employ people probably need EL. 

An 'employee' doesn't just mean full-time staff and anyone who carries out work for you can be classed as an employee. Including: 

• part-timers 
• volunteers 
• agency workers 
• work experience kids 
• secondees 
• temporary and seasonal staff
• helpers 
• apprentices and trainees
• staff borrowed by you 
• labour-only subcontractors under your supervision. 

Even if someone isn’t on your payroll, you're still responsible for their health and safety if you direct, supervise, or tell them what to do in any way.

According to the HSE, you’d need employers’ liability insurance for anyone ‘who you employ under a contract of service or apprenticeship’.

As a simple rule of thumb: if someone works under your direction, uses your tools, or follows your schedule, they probably need to be covered.

Are there any businesses that don't need EL?

There are a few exceptions. You might not need employers’ liability insurance if: 

• You’re the only employee and own 50% or more of the business. 
• You run an unincorporated family business that only employs close relatives. 

If you’re unsure, it’s worth checking what the Health and Safety Executive (HSE) says on the matter. Or getting some advice from an insurance broker – like us.  

What happens if I don't have EL?

If you should have employers’ liability insurance but don’t, and a health and safety officer comes knocking, you could be in line for a hefty fine.  

The HSE can fine you up to £2,500 each day you’re uninsured. Plus another £1,000 for not displaying an insurance certificate.  

In fairness, it’s likely you’ll be given a few days’ grace to sort out a policy rather than get fined on the spot. But it’s best not to chance it. 

How much employers' liability cover do I need?

By law, most businesses need at least £5 million of cover.  

In practice, most insurers offer £10 million as standard. That’s because employers’ liability claims can be costly – especially if they involve serious injuries or long-term illness and lots of time off work.  

Even a claim for back problems sustained by sitting for long periods in a non-ergonomic office chair can easily run into £thousands. And serious accidents and injuries inevitably demand much more... 

How much does employers' liability insurance cost?

The cost of your employers’ liability will depend on a few different factors. Insurers usually look at things like: 

• what your business does 
• your annual turnover
• how many employees you have
• your annual wage bill
• whether you do any work outside of the UK.

The good news is your policy usually covers all your employees, even as your business grows.

You'll pay the same whether you have one employee or several. And you don't have to tell your insurer every time someone joins or leaves your company.   

How is employers' liability insurance different from public liability insurance?

You might have heard that public liability (PL) insurance also protects your business from work-related accidents and illnesses. And in a way you’d be right.  

But PL and EL cover very different types of claims.  

The clue’s in the name. Employers’ liability covers claims from your employees. While public liability covers claims from members of the public (including any customers, visitors to your office, or innocent bystanders).  

Many insurers sell both policies together. And so many businesses choose to have both, so they know they're covered for all scenarios.

What are some examples of employers' liability claims?

Claims don’t have to be big and dramatic. Many come from everyday workplace risks.

For example: 

• an employee putting their back out while lifting something heavy 
• a volunteer developing repetitive strain injury after stacking shelves all day unsupervised 
• poor training and/or insufficient safety equipment, leading to an accident that requires an employee to take time off work to recover.  

As soon as an accident like this happens, even if it’s a seemingly minor knock or trip, you must log it in your accident report book and tell your broker or insurer about it.  

Employee-related illness and injury claims can take a while to surface and the first thing the insurer will check is whether they were notified of the accident at the time (as per the terms of your policy).  

They’ll also want to know if your employee complained to you about their accident or injury, either verbally or in writing. These should be flagged up with your insurer straightaway to ensure your claim goes through smoothly.

How do employers' liability claims work?

It can feel daunting if an employee (or former employee) believes their illness or injury was caused by their work. But you won’t be left dealing with it alone.  

Here’s what normally happens during EL claims: 

1. You’re notified of the claim. Your employee might complain to you about their illness or injury directly. Or you might hear about it from their solicitor.  
2. You pass the claim to your insurer. You should get their complaint down in writing and send the details to your insurer (or broker) as soon as possible. They’ll be able to reassure you and guide you through the next steps.  
3. The claim is investigated. At this point, your insurer may ask for accident records, witness statements, training and safety documents, or any other evidence. (Remember, they’re not trying to catch you out. They’re simply trying to build as clear a picture as possible of what happened.)
4. You respond to the claim. You’ll need to say whether you think you’re responsible for your employee’s accident or injury. It should all be explained in your policy documents but this usually has to happen within 30 days of your employee notifying you of their claim. 
5. Your insurer handles your claim. They’ll investigate what happened, communicate with the employee’s solicitor, and negotiate any compensation that’s needed. In fact, they’ll do everything they reasonably can to resolve the situation as smoothly as possible. 

What if my employers' liability claim ends up in court?

Insurers try hard to make sure most EL claims are resolved out of court.  

However, unexpected things happen sometimes. If your insurer decides you’re not responsible for the claim but your employee tries to press it anyway, you might have to justify your position in front of a judge.  

If that happens, don’t worry. Your insurer still covers your court costs and appoints a lawyer to defend your reputation.  

Whatever the outcome, you can rely on having your insurer’s support from start to finish. And if you use a broker, you’ll also have an intermediary checking in on you and making sure you’re clear on what’s happening at every stage.  

Do I need any other cover?

Employers’ liability is your legal safety net for workplace injury and illnesses. But it doesn’t cover everything.  

Depending on your business, you might also want: 

• employment practices liability insurance (EPLI) – covers employment-related claims like unfair dismissal, discrimination, breach of contract, and more. 
• directors' & officers' insurance (D&O) – protects the leaders and key decision-makers in your company if they make a wrong call and are held personally responsible for it. For example, for breach of care or health and safety violations.  

EPLI and D&O combined form a protective armour that covers employment-related claims against your leadership team and the wider business.  

Unfortunately, today’s business risks often extend beyond the stock room or office ergonomics. Where EL leaves off, EPLI and D&O can shine.  

Anything else?

When you get your policy documents from your insurer or broker, you should stick your employers' liability certificate in an obvious spot on a suitable wall – somewhere everyone can see it. That's because it's your legal responsibility to have it in a place others can easily read it. 

And if you don't have a wall, you can store your certificate electronically. Just make sure your people know how to access it if they want to. 

Personnel protection

In a nutshell, carrying EL ensures peace of mind that your employees are looked after. And your reputation as a responsible employer kept squeaky clean. 

If you want EL advice straight from the horse's mouth, the HSE has put together a handy employers' liability insurance guide. It’s everything you need to know about employers' liability in one document. 

You can also find more info on our employers' liability page or give us a call on 0345 222 5391. We’ll be happy to answer any questions you may have.  

Image used under license from Shutterstock.