Employer Liability Insurance

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 Do You Need Employer’s Liability Insurance?


This is a question that it is very important to get right. No matter how small your business may be, if you formally employ others you are required by law to have Employer’s Liability (EL) cover – and failure to do so can result in a stinging fine: £2,500 for each day that you do not have the cover in place.


Essentially, EL cover will allow you to meet the costs of legal fees and damages for employees who either fall ill or are injured at work through the fault of the employer. If employer negligence lies behind an employee’s injury, he or she can seek compensation even if the firm has gone into liquidation, so EL insurance is a real necessity rather than an optional luxury. Not only this, but the NHS can also seek hospital treatment and ambulance costs from the firm in the event of personal injury compensation being paid.

Be clear about the definition of ‘employee’, however – you won’t need this cover if you are a sole trader and your firm is not a limited company, or if you only employ close members of your family. An employee is defined as anyone who is under a contract with you, who cannot employ a substitute when not at work, whose pay you deduct income tax and National Insurance Contributions from and who you control in terms of what, where and how they work.


If these criteria apply, you will need the cover. The law requires that your EL insurance covers all your employees in England, Scotland, Wales and Northern Ireland. You should be insured for a minimum of £5 million, although most insurers will provide cover of at least £10 million.