Employers' liability insurance: the legal requirement

What the requirement is designed to cover

The Employers' Liability (Compulsory Insurance) Act 1969 requires most employers to insure liability for employees' injury or disease arising out of and in the course of employment. Cover must be with an authorised insurer and meet the statutory requirements. The minimum amount is £5 million; that minimum does not establish the appropriate limit for every business.

This cover concerns the employer's liability to employees. Public liability concerns a different set of claims, generally involving third parties, and is not a substitute. Nor does a contract clause requiring another business to hold insurance establish that your own legal obligations have been met. Identify the activity and relationship involved.

Check the named insured and the businesses covered. If several companies operate from one workshop, the certificate should not be assumed to cover them all merely because they share an owner. A group arrangement can be possible, but the actual entities and policy terms need to match the operation.

The framework discussed here is for Great Britain. Northern Ireland and other jurisdictions have their own requirements. If staff work across borders, ask the insurer and an appropriate adviser how the arrangements fit together. A policy certificate that can be used in several locations does not eliminate the need to check local law.

Look at the relationship, not just the label

The requirement concerns people employed under a contract of service or apprenticeship. A contract can be written, spoken or implied by the arrangement. Calling somebody a freelancer, paying against invoices or treating them as self-employed for tax does not alone decide the insurance question.

The HSE highlights the reality of control and working arrangements. Consider who decides how and when work is done, who supplies equipment, whether a substitute can genuinely be used and whether the person runs an independent business. No single indicator is a reliable shortcut for every situation.

Use the table to prepare facts, not to award yourself an exemption. If the position is uncertain, describe the arrangement to the insurer and obtain legal advice where needed. Preserve the actual contract and a note of how the work is performed; a document that no longer reflects practice can be misleading.

Include casual labour, apprentices and unpaid placements

A short engagement or part-time timetable does not automatically remove the requirement. Apprentices are expressly included in the legal framework. Seasonal helpers and labour-only subcontractors deserve particular attention because an owner may believe there are no employees while directing their work in much the same way as regular staff.

Describe labour-only and genuinely independent subcontracting arrangements separately when discussing cover. Explain who supervises, supplies tools, decides methods and is responsible for the finished work. Do not assume that seeing another person's insurance certificate answers whether they also need to be included within your arrangements.

Volunteers, work-experience students and unpaid placements may be covered by an existing policy, but confirm the position with the insurer before they start. The absence of wages is not a reason to leave them out of the conversation. Ask whether any notification or specific activity restrictions apply.

Keep an up-to-date list of everyone working under the business's direction, including people who do not appear on a permanent payroll report. Review it when a new site, project or staffing arrangement begins. This gives the insurance discussion a practical basis and reduces reliance on an annual headcount remembered from last renewal.

Apply the main exemptions precisely

The close-family exemption can apply where the relevant employees are closely related to the employer within the specified relationships. It does not apply to an incorporated limited company simply because all its workers belong to one family. Incorporation changes the legal employer and therefore changes the analysis.

There is a separate exemption for a company whose only employee also owns at least 50% of its issued share capital. Both parts matter: that person must be the only employee and must meet the ownership condition. A single director is not necessarily a single employee, and being the founder does not establish the shareholding test.

If a company relies on that exemption, review the position before adding another worker or changing ownership. Keep the evidence supporting the assessment. A new employee can change the facts even if their hours are limited, and a share transfer can matter even where day-to-day management stays the same.

Other statutory exemptions exist, including for specified public bodies, but are unlikely to resolve an ordinary small trading business's position. Consult the HSE guidance and relevant law where an exemption may apply. Do not select a policy answer based only on a brief description of the business as family-run or owner-managed.

Check where employees are normally based

The HSE explains that employees normally based in England, Scotland or Wales generally bring the Great Britain requirement into consideration, including relevant offshore work. Staff normally based abroad require a check of the law where they are based, rather than an assumption that the UK company's ordinary policy settles everything.

For employees normally based abroad who visit Great Britain, the HSE describes a requirement where they spend more than 14 continuous days here, or more than seven days on an offshore installation. Record the actual location and duration of assignments and ask the insurer how visits are covered.

Overseas work can also raise questions about the policy's territorial limits and jurisdiction for claims. These are related to, but different from, the statutory duty to hold cover. Tell the insurer about the work before it begins and retain its written response. A travel booking or payroll address is not a complete description of an assignment.

Make the certificate accessible and keep the history

The insurer must issue the certificate within the applicable 30-day period under the regulations. Check that the current document identifies the covered employer and period correctly. Display a copy where employees can easily read it. Electronic display is permitted if employees know where it is and have reasonable access.

An electronic folder that only the owner can open is not useful access for staff. Consider employees who work away from a computer, at another site or on a different shift. Explain the location during induction and provide a practical way to view the document without sharing confidential policy administration credentials.

Since 2008, there has been no legal requirement under these rules to retain old certificates. The HSE even so strongly advises keeping a complete historical record because occupational disease claims can emerge long after the work was done. Archive certificates with policy schedules and the names of the entities covered.

Make the archive durable through a move, system change or change of accountant. Include previous trading names and insurer correspondence so the business can identify the relevant cover period later. Do not delete the old certificate simply because the current one has arrived.

Penalties and policy conditions still matter

The HSE states that an employer can be fined up to £2,500 for each day it lacks required insurance. A separate fine of up to £1,000 can apply for failing to display the certificate or make it available to inspectors when required. These are statutory penalty figures, not insurance prices.

The compulsory-insurance rules restrict an insurer's ability to refuse employee compensation solely because of certain employer failures, such as specified record-keeping, notification or employee-protection breaches. This is not a statement that every policy condition is irrelevant. The insurer may have rights to recover money from the employer after paying.

Continue to meet health and safety duties, report relevant incidents and follow the policy process. Insurance does not replace risk assessment or safe working. If a claim is threatened, notify the insurer through the stated route and preserve the evidence rather than assuming the certificate alone resolves the situation.

What to do next

Before the next person starts work, prepare this check:

• List employees, apprentices, casual workers and labour-only arrangements.
• Describe actual control, equipment and substitution arrangements.
• Verify the legal employer and any exemption being considered.
• Tell the insurer about work locations and unpaid placements.
• Check the current certificate and staff access.
• Preserve old certificates and policy records in a permanent archive.

For wider disclosure preparation, read the duty of fair presentation. A business insurance enquiry introduces you to one named commercial insurance specialist, who can discuss the business's requirements and the proposed policy terms.