Who is exempt from employers’ liability insurance?

To be legally and contractually compliant as a business, it is important to ensure you have all the correct insurance in place.

This Q&A looks at one form of construction insurance: employers’ liability insurance, why it is needed, and who may not need it.

What is employers’ liability insurance?

Employers’ liability insurance covers the cost of damages, compensation, and legal fees if a current or former employee is injured or becomes ill as a result of working for you.

If you are an employer, it is a legal requirement to have employers’ liability insurance. You can be fined up to £2,500 for every day you don’t have it. You can also be fined for not displaying your insurance certificate.

Which businesses must have employers’ liability insurance?

Nearly every business or person who employs someone must have employers’ liability insurance.

An ‘employee’ is anyone who has entered into or works under a contract of service or apprenticeship with you. It doesn’t matter whether you have a written contract, spoken agreement, or just an unwritten ‘understanding’ between you.

Who counts as an employee?

‘Employees’ include:

permanent workers
contract staff
casual and seasonal workers
temporary or part-time staff
trainees, apprentices, and students
volunteers and people on work placements.

Some sub-contractors may also be considered ‘employees’ under UK employment law.

When deciding whether someone is an employee, it is important to consider the following:

Do you pay their National Insurance and income tax (from their salary)?
Where do they work?
What are their hours of work?
Do they have set hours?
How are they paid?
What are the terms and conditions of their pay and work?
Who decides what work they must do?
Who provides their tools and equipment?

This is not an exhaustive list. if you’re not sure whether someone is an employee or sub-contractor, speak to your insurance company or accountant.

Are any businesses exempt?

There are some very limited exceptions. These include businesses that:

have no employees
only employ workers who are based abroad.

When do you need to have employers’ liability insurance in place?

Employers’ liability insurance is required as soon as you start employing anyone.