Employers’ liability insurance is a legal requirement for most UK businesses with at least one employee. The minimum cover level required by the law is £5 million, and the fine is up to £2,500 for each day that the employer doesn’t have insurance. Some organisations are exempt from this legislation.
For most businesses with employees, employers’ liability insurance is a legal requirement. Exemptions include some businesses that only employ close family members or workers who live abroad (although if this is the case you should check the law in the country where your employees are based).
Plus, if your business only hires contractors, they may not legally count as employees of your business, so you may not be legally required to have employers’ liability insurance.
The definition of ‘employee’ for the purposes of the legislation can be a little complicated. Someone usually counts as an employee if the business deducts National Insurance contributions and income tax from their wages at source, and supplies the equipment they need to do the job. This means that certain kinds of subcontractors - in particular labour-only subcontractors - may count as employees, but bona-fide subcontractors and independent contractors usually don’t.
For more information on the employers’ liability insurance rules and exemptions, check the legislation. Remember that even if your business is not legally required to hold an employers’ liability insurance, it’s often still a good idea to have one, as compensation claims for illness or injury can be very high.