Yes, if you employ staff in the UK you almost always need employers liability insurance by law. Even as a small company or early-stage founder, failing to have it in place can lead to fines from the Health and Safety Executive.
This guide explains the legal requirements, who is exempt, how much cover you need, where to display the certificate and the practical steps to stay compliant without unnecessary cost.
What is Employers Liability Insurance?
Employers liability insurance protects your business if an employee suffers an injury or illness caused by their work. It covers legal costs and compensation payments if the employee makes a claim against you. The policy responds when an employee proves that your business was negligent in providing a safe working environment.
As a small limited company you remain responsible for health and safety even if you only have one or two members of staff. The insurance is separate from public liability cover, which protects members of the public rather than your own employees.
Legal Requirements for UK Companies
Under the Employers Liability (Compulsory Insurance) Act, most businesses that employ people must hold appropriate cover. This applies whether you operate as a limited company, partnership or in certain cases as a sole trader who employs others. The requirement exists to ensure that employees can claim compensation even if the business cannot pay directly.
You must arrange the insurance before any employee starts work. The law applies across England, Scotland and Wales; Northern Ireland has similar but separate rules. Requirements can change, so always check the latest guidance on GOV.UK before making decisions.
Key obligations include:
- Arranging a policy with an authorised insurer
- Maintaining cover for the full period any employee works for you
- Keeping records of the insurance for at least 40 years in some cases
Exemptions: When You Might Not Need It
Not every small company requires employers liability insurance. The most common exemption applies if you are a sole trader or partnership with no employees other than yourself or your business partner. Family members employed in the business may also be exempt in specific circumstances, but the rules are narrow.
Limited companies must usually insure even if the only employee is the director, because the company is a separate legal entity from the individual. However, if you operate through a limited company with absolutely no employees at all, you are not required to hold the cover.
Other limited exemptions exist for certain public bodies, certain types of volunteer organisations and businesses in specific industries. Because these change and depend on your exact structure, review the current exemptions on GOV.UK or speak with a qualified insurance adviser before assuming you are exempt.
Minimum Cover Levels and Policy Practicalities
The law sets a minimum level of cover that must be provided, but the exact figure can change over time. Most standard policies in the UK market offer at least the current legal minimum, often with higher limits that give additional protection. Check the certificate carefully to confirm it meets or exceeds the legal requirement at the time of purchase.
When comparing policies consider the types of work your employees carry out. An e-commerce fulfilment team handling heavy parcels may need different risk assessment than a purely office-based customer support team. Many insurers ask for basic details about your workforce size, locations and activities before quoting.
Practical tip: arrange cover as soon as you make your first hire, even if the person works only a few hours per week. Temporary or zero-hours staff still count as employees for this purpose.
Display Rules and Record Keeping
You must display the original certificate of insurance or a valid copy where employees can easily see it. For most small companies this means pinning a copy on a noticeboard in the main workspace or break area. If all staff work remotely you must still make the certificate available to them electronically within a reasonable time if they ask for it.
Insurers now commonly provide both a physical and digital version. Keep copies of every certificate for previous years because employees can make claims years after an incident occurs. Many businesses store these securely in cloud storage with clear naming and dates.
Failure to display the certificate when required can itself result in a fine, separate from the fine for not having insurance at all. Make it part of your onboarding checklist to show new employees where the certificate is displayed.
Steps to Get and Maintain Compliance
Follow these practical steps to stay on the right side of the law:
- Decide your exact employment structure – confirm whether directors, contractors or family members count as employees under the rules.
- Obtain quotes from at least two authorised insurers, providing accurate information about your team size and work activities.
- Check the small print for any exclusions that might affect your type of business, such as work-from-home arrangements or specific e-commerce risks.
- Arrange the policy before the first employee starts and set a calendar reminder for renewal.
- Display the certificate immediately and inform all staff where to find it.
- Review the policy each year or whenever your headcount or working practices change significantly.
Many small companies combine employers liability with other covers in a single business insurance package to simplify administration and often reduce overall cost.
Common Pitfalls for Early-Stage Founders
Early-stage e-commerce founders sometimes assume that because they are small or everyone works remotely they do not need employers liability insurance. The law looks at whether an employment relationship exists rather than the size of the premises. A director who pays themselves through the company payroll is usually considered an employee of that company.
Another frequent mistake is using contractors instead of employees to avoid the requirement, only to discover later that HMRC or an employment tribunal reclassifies them as employees. Always document the genuine nature of contractor relationships.
Finally, some founders forget to update their insurer when headcount grows. A policy that was taken out when there was one employee may need adjustment once the team expands. Regular reviews prevent accidental gaps in cover.
Frequently asked questions
Do I need employers liability insurance if I only have one employee?
Yes. The legal requirement applies as soon as you have at least one employee, regardless of how many hours they work. Even a single part-time member of staff triggers the need for cover. Limited companies must usually insure directors who are on the payroll.
What is the minimum employers liability insurance amount required?
The law requires a minimum level of cover that changes from time to time. Most UK insurers automatically provide at least this amount and often more. Always verify the current legal minimum on GOV.UK and ensure your certificate reflects a compliant level at the time of purchase.
Where exactly do I have to display the employers liability certificate?
The certificate must be displayed in a prominent position where your employees can easily see it. This is usually a staff noticeboard or kitchen area. For fully remote teams the certificate must still be made available to staff on request, typically by email or shared drive.
Can I be fined for not having employers liability insurance?
Yes. The Health and Safety Executive can issue fines for operating without appropriate cover and for failing to display the certificate. Fines can be issued per day the business is non-compliant. Directors may also face personal consequences in serious cases.
Does employers liability insurance cover remote workers?
Yes, provided the policy wording includes home working. Most modern policies do, but you should confirm this when arranging cover. You remain responsible for the health and safety of remote employees, so accurate information must be given to your insurer.
Related reading: When Public Liability Insurance Is Necessary for Your Business, Should AI and E-commerce Consultants Carry Professional Indemnity Insurance?, Is Cyber Insurance Worth It for Small UK Online Businesses?. Browse all company admin & legal guides or apply to Loomworks.