Employers’ liability insurance can play a vital role in helping to protect UK businesses that hire staff. While it may not always be legally required, failing to arrange this type of cover when it is needed could expose employers to fines, claims, and regulatory action.

We explore what employers’ liability insurance can include, when it may be necessary, and the risks a business could face if it operates without suitable protection.

What Is Employers’ Liability Insurance?

Employers’ liability insurance is designed to help cover compensation and legal costs if an employee claims for illness or injury that is linked to their work. This type of insurance could support claims involving:

• Workplace accidents
• Long-term health issues caused by the working environment
• Injuries sustained while using equipment or machinery
• Failures in health and safety procedures

Cover may extend to full-time and part-time staff, and in some cases, temporary workers, volunteers, apprentices, or subcontractors, depending on the nature of the working relationship.

Is Employers’ Liability Insurance Mandatory in the UK?

Employers’ liability insurance may be a legal requirement for many UK businesses. Under the Employers’ Liability (Compulsory Insurance) Act, most employers who have staff are expected to have a valid policy in place from an authorised insurer.

Exemptions could apply in limited circumstances, such as for businesses that only employ close family members or sole traders without hired help. However, interpreting the legal obligations can be complex, and professional guidance may be useful when determining whether cover is required.

What Could Happen Without It?

1. HSE Fines

The Health and Safety Executive (HSE) enforces the legal requirements around employers’ liability insurance. If a business should have cover but does not, it may face financial penalties. These can include:

• A fine of up to £2,500 for each day the business operates without required cover
• An additional fine of up to £1,000 for failing to display a valid certificate of insurance when required

These penalties can be issued regardless of whether a workplace accident has occurred.

2. Exposure to Legal Claims

If an employee suffers an injury or becomes ill due to their work, they could pursue a compensation claim. Without employers’ liability insurance, the business may be responsible for:

• Legal defence costs
• Compensation payments
• Medical expenses and loss of earnings

For small businesses or new employers, these costs could be substantial and potentially disruptive to ongoing operations.

3. Reputational and Operational Impact

Beyond financial risk, not having the right cover could affect a business’s reputation. Clients, regulators, or partners may be less willing to engage with a business that is not fully protected. Public trust and employee confidence could also decline if a business is seen to neglect staff welfare or legal compliance.

How to Determine Whether Cover Is Required

Employers may wish to consider the following when deciding whether employers’ liability insurance is necessary:

• Whether staff are paid through the business’s payroll
• Whether the business directs how, when, and where they work
• Whether employment contracts are in place
• Whether tax or National Insurance is deducted by the business

Where there is uncertainty, a broker can help employers understand their responsibilities and find suitable cover through regulated insurance providers.

Protecting Your Business and Team

Employers’ liability insurance can be an important safeguard for businesses that rely on a workforce. While it may not be required in every situation, operating without it when it is needed could result in costly penalties and claims.

Taking steps to arrange appropriate cover could help employers avoid disruption, protect their people, and demonstrate compliance with health and safety expectations.