Employers liability insurance explained and when you need it
Employers’ liability insurance is one of those costs that can feel like an administrative annoyance — until you need it. For most UK businesses that hire staff, it’s not optional. The law requires it, and the consequences of skipping it go far beyond a fine.
What employers’ liability insurance actually covers
Employers’ liability insurance (ELI) pays out if a current or former employee develops a work-related illness or gets injured on the job and makes a claim against you. That includes legal costs, medical expenses, lost income, and any compensation a court orders you to pay.
It’s different from public liability insurance, which covers injuries to members of the public. ELI is specifically about the people you employ. And it’s not just for full-time permanent staff. Seasonal hires, interns, and people working from home all count.
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The Employers’ Liability (Compulsory Insurance) Act 1969 requires businesses with staff to hold at least £5m in cover from an insurer authorised by the Financial Conduct Authority. You also have to display the certificate where employees can see it — physically or digitally.
What happens if you don’t have it
“The most common mistake would not be getting the cover when it is legally required. This would usually result in prosecution if a claim was made against them,” said Jordan Gregg, group underwriting director at Cedar Underwriting.
A 2025 report from Hiscox found that 74 per cent of SMEs are underinsured globally. That gap can become a serious problem later. Even if no claim is made, the lack of cover follows you. “Even if a claim wasn’t made, the client may find it difficult to get insurance coverage again as they would be required to disclose this fact to future insurers,” said Gregg. “Insurance companies would see this as a red flag of poor risk management and lack of understanding of the client’s obligations. All businesses are considered ‘sophisticated buyers’ and therefore should be aware of their obligations.”
What does employers’ liability insurance cost
“Retail workers for example would attract a lower premium as the exposure to death, injury or illness is minimal, much like clerical workers. Those working in manufacturing processes with heavy machinery are at a higher risk of injury,” said Gregg. “The most expensive premiums tend to be those that work at height and/or where heat is involved. For example, roofers and scaffolders attract expensive premiums due to the dangerous work and potential injury should something go wrong.”
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Some businesses end up with ELI without realising they bought it. “Some small ‘package’ type policies would just include EL as standard,” said Gregg. “A package policy is where a series of covers are ‘packaged’ together rather than picking and choosing what is required.”
How to buy it and how to cut the cost
You can buy ELI through insurers directly, through brokers, or via trade associations. Comparison sites work too, though they have limitations. “They all have different filters so that you can get the right product for you. Depending on the size of your business, how many employees you have – all sorts depending on what you’re looking for and then you can [go] bespoke with the providers directly once you get your quote,” said Jamie Day, associate at Slater & Gordon.
Before you commit, check the FCA register to confirm the insurer is authorised. Using an unauthorised insurer can itself put you on the wrong side of the law. To keep premiums down, start talking to your broker early and have your risk documentation ready. Good training protocols, an accident log, and a thorough all signal to insurers that you’re a safer bet. “Companies can reduce their premiums by demonstrating excellent attitudes towards risk management,” said Gregg.
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Subcontractors and the murky middle ground
The rules get complicated when you hire subcontractors or freelancers. It all comes down to control. Judith Rutherford, former director of the London Skills and Employment Board, outlined the test: you need ELI for someone if you deduct national insurance and income tax from their pay, control when and where they work, supply most of their materials, or require them to deliver the service personally without substituting someone else. You probably don’t need it if they work for multiple clients, supply their own equipment, run their own business, or can send someone else to do the job. But these are indicators, not a checklist — the final call depends on the full picture.
Displaying your ELI certificate is a legal requirement, and it’s not just for show. “There was an amendment to the regulations in 2008 that allows digital display, but again, the employer has a duty to explain to their employees where to access it and make sure they are able to access it to avoid that fine,” said Day.
If you’re unsure whether your current policy covers everyone — including remote workers — it’s worth checking. The cost of getting it wrong is a prosecution, a fine, and a mark against your business that insurers won’t forget.
