INSURANCE GUIDE
Employers Liability Insurance UK
The legal requirement for employers liability insurance, what it covers, who needs it, and the consequences of non-compliance.
TL;DR
- Employers liability insurance of at least £5m is legally required under the Employers Liability (Compulsory Insurance) Act 1969.
- The fine for not holding valid EL cover is up to £2,500 per day.
- EL covers employee claims for work-related injury and illness.
- Some businesses are exempt - sole traders with no employees and businesses employing only close family members in certain circumstances.
The Legal Requirement
The Employers Liability (Compulsory Insurance) Act 1969 requires all employers in Great Britain to hold a minimum of £5m of employers liability insurance. The insurance must be arranged with an authorised insurer. A valid insurance certificate must be displayed at each place of business or made available to employees electronically under the Employers Liability (Compulsory Insurance) Regulations 1998. The Health and Safety Executive (HSE) enforces the requirement and can impose fines of up to £2,500 for each day a business trades without valid cover.
What EL Insurance Covers
Employers liability insurance covers the employer's legal liability to pay compensation to employees who suffer work-related injury or illness. It covers: the legal defence costs of defending a claim; any compensation awarded by a court or agreed in settlement; and legal costs incurred by the employee in bringing a successful claim. Claims can arise from physical accidents (a fall from a ladder, a machinery injury), occupational diseases (industrial deafness, repetitive strain injury, mesothelioma from asbestos exposure), and stress-related illness caused by working conditions.
Who Must Hold EL Insurance
Any business that employs anyone under a contract of employment or apprenticeship must hold EL insurance. This includes: part-time employees; casual and seasonal workers; zero-hours contract workers; and apprentices. Labour-only subcontractors who work under the direction and control of the business may also be treated as employees for EL purposes. The status test is whether the individual works under the employer's direction and control - not just whether there is a formal employment contract.
Exemptions
Certain businesses are exempt from the EL requirement: sole traders who employ only themselves; limited companies where all employees are also shareholders holding at least 50% of the shares; and some public sector organisations that self-insure. Family businesses employing only family members in certain blood or marriage relationships are also exempt. The exemptions are narrow and specific - if you are in doubt about whether an exemption applies, assume you need EL insurance until a legal adviser confirms otherwise.
Related Guides
Disclaimer
This guide is for general information only and does not constitute financial or insurance advice. Kaeltripton.com is not regulated by the FCA. Always read policy documents in full before purchasing cover.
Sources
Frequently Asked Questions
What is the minimum employers liability cover required?
The legal minimum is £5m per claim. In practice, most commercial EL policies are arranged for £10m - the industry standard level - as the £5m minimum was set in 1969 and has not been adjusted for inflation. The £5m legal minimum is the floor, not the optimal level. Most commercial insurers issue EL policies at £10m as standard, so the distinction between the legal minimum and the market standard rarely arises in practice.
Do I need employers liability insurance for unpaid volunteers?
Unpaid volunteers are not employees and the EL legal requirement does not apply to them. However, organisations working with unpaid volunteers should consider voluntary workers extension insurance, which provides similar protection to EL for volunteers who are injured in the course of their voluntary work. The organisation's public liability may cover third-party claims; a voluntary workers extension specifically covers the volunteers themselves.
