Employers’ Liability Insurance: A Guide for Local Businesses
Taking on your first employee? Here is what employers’ liability insurance covers, the minimum cover and what you must display.
Hiring your first member of staff is a milestone for any local shop, café or workshop. It also brings a legal duty that is easy to overlook: employers’ liability insurance. This guide sets out the basics, drawing on GOV.UK guidance.
What it is
Employers’ liability (EL) insurance pays compensation if an employee is injured or becomes ill because of their work. GOV.UK says you need it as soon as you become an employer, so it should be in place before your new starter’s first day, not after.
How much cover?
You must be covered for at least £5 million. Many policies provide more, so check what your insurer offers and whether the limit suits your business.
Choosing an insurer
Your insurer must be authorised. GOV.UK says you can check the Financial Conduct Authority (FCA) register or contact the FCA to confirm. You can buy directly or use an insurance broker, and the guidance points to a list of brokers published by the British Insurance Brokers’ Association.
The cost of getting it wrong
The penalties are serious. GOV.UK states that you can be fined £2,500 every day you are not properly insured. There is a separate fine of £1,000 for failing to display your certificate. For a small business, either could be damaging.
Displaying your certificate
You must display your EL certificate where employees can easily access it. GOV.UK gives examples such as the workplace itself, your website or your intranet. You must also show it to inspectors if asked. A simple approach is to frame a copy beside the staff noticeboard and save a digital copy in your shared folder.
Who does not need it?
You do not need EL insurance if you only employ a family member. GOV.UK lists spouses, civil partners, parents, grandparents, step-parents, children, grandchildren, step-children, siblings and half-siblings. You also do not need it if you only employ someone based outside England, Scotland and Wales. If you are unsure whether you fall into one of these categories, check the full guidance before relying on the exemption.
A short checklist for new employers
- Confirm you will have an employee, not only self-employed helpers.
- Get quotes for cover of at least £5 million.
- Check the insurer is on the FCA register.
- Arrange the policy to start before day one.
- Display the certificate and keep a copy.
- Diarise the renewal date so cover never lapses.
Why this matters for the high street
Independent businesses are the backbone of a lively local high street. Taking on staff is a sign of confidence, and getting the basics right protects both the people you hire and the business you have built.
Keeping it up to date
Cover is not a one-off task. Review your policy each year, tell your insurer when headcount changes, and make sure new starters know where the certificate is displayed. A few minutes of upkeep each renewal keeps you compliant and avoids unpleasant surprises.
Where to go next
Read the full GOV.UK guidance on employers’ liability insurance, and speak to an insurer or broker about the right policy for your business. This article is general information and does not replace professional advice.
Source: GOV.UK, "Employers’ liability insurance". Figures correct at the time of writing; check GOV.UK for the latest.