Employers’ Liability Insurance – Don’t get caught out!

Whatever the line of work, all small businesses will carry a certain element of risk which could affect its staff and the public.

There are currently 5 million small to medium enterprises (SME’s) in the UK and records show that there were 2.15 million small businesses registered for VAT/or PAYE in the UK in March 2010. Of these, 58.9% are registered as corporate businesses and 23.8% (511,700) as sole proprietors/traders (Statistics.gov.uk).

In October 2010, the employment rate of the working age population was 70.6% (statistics.gov.uk) and it was later found that smaller businesses provide around 60% of jobs in the UK (bis.gov.uk). So, if these facts are correct, it is assumed that 1,266,350 of UK small businesses hold employers liability insurance (EL)?

Unfortunately, this is not the case.

There are many corporate businesses in the UK operating illegally because they have not purchased employers liability insurance. This may simply be due to a lack of knowledge, or it could be down to arrogance, either way the importance of an EL policy must not be misunderstood.

Understand Employers Liability Insurance

Employers’ Liability (Compulsory Insurance) Act 1969 protects a business and its owner from any liability claims made by employees who have been injured at work or suffered a work related disease.

Employers’ liability insurance is a legal requirement which will cover the cost of compensation if an employee suffered an injury, illness or disease whilst at work, even if they have followed instructions.

Any business that employs staff must obtain the correct employers liability insurance cover. Failure to do so could leave a business susceptible to substantial penalties – £2,500 for each day it has traded without EL and/or sometimes imprisonment – maximum of 14 years.

Previous EL records/certificates should never be disposed of as claims can arise a long time later due to various diseases taking a long time to develop.

How to purchase EL?

Employers Liability Insurance is not often bought as a standalone policy. It is generally combined with a public liability insurance (PL) policy. Although PL is optional, it will be proven a valuable purchase if the business comes into contact with the public. It will cover any claims made by the public who have been negatively affected by business operations.

Manage Health & Safety

A corporate business will employ staff to carry out/contribute to its business activities/operations. An employer is responsible for the health and safety of its employees and is required by law to ensure that they are protected whilst at work.

Minimise the risk of a liability claim by planning and implementing a coherent Health and Safety policy/strategy which include frequent risk assessments.

2009/10 figures showed that 152 workers suffered fatal injuries at work, resulting in a loss of 28.5 million working days; 1.3 million people suffered from an illness believed to have be caused/made worse by their current or past jobs resulting in 23.4million lost days and an additional 121,430 other employee injuries were reported under RIDDOR*, resulting in a loss of 5.1 million working days (HSE.gov.uk).

These costly consequences will not be covered by an EL policy but can be managed with an effective and efficient Health and Safety strategy.

Additionally, the Health and Safety Executive (HSE) perform random inspections to ensure that the working area is safe and complies with regulations. Not only will the health and safety of the business be inspected, they will also request a valid EL certificate – which should always be visible to employees. New regulations mean that it can be displayed in electronic format.


  • A sole trader will not need to acquire EL as it will not employ any staff and hence the alternative name – ‘one-man band’. Any work experience students and voluntary/unpaid ‘helpers’ will be classed as an employee and Employers’ Liability Insurance will be required.
  • A family business will not need to obtain EL – Unless it is incorporated as a Limited Company.
  • Most public organisations will not require EL – Government departments and agencies, local authorities, police authorities and nationalised industries and Health service bodies – National Health Service trusts, Health Authorities.

An increased premium is a better option than jail, so if a business is in doubt it should purchase Employers Liability insurance.

* RIDDOR – The Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 1995

The purpose of this guide is to give an understanding. It is not a legal interpretation of the Employers’ Liability (Compulsory Insurance) Act and has no formal legal status.

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