When you run a contracting business, workplace injuries or illnesses can still happen — no matter how careful you are or how closely you follow health and safety guidelines. This is true even in non-manual roles such as IT, consultancy and project management.
Contractor UK’s preferred insurance partner, Markel Direct, explains what employers’ liability insurance is, why it matters and who needs it.
What is employers’ liability insurance?
Employer's liability insurance protects your business if an employee becomes ill or is injured because of the work they do for you.
As a contracting business owner, your team may work across multiple environments — your office, their home, client premises or data centres — which makes it difficult for you to control all of the risks they face.
This type of insurance can cover:
- Compensation owed to your employee if they suffer an injury or illness during, or as a result of their employment.
- The legal costs of dealing with the claim.
Who needs employers’ liability insurance?
If you employ anyone — permanently, on a contract basis or as an apprentice — even if their employment is part-time or temporary, you will almost certainly need employers’ liability insurance.
To summarise, you will need employers’ liability insurance if you have any:
- Employees you direct or control (e.g. you supply their work laptop and set their work hours)
- Apprentices
- Paid interns
- Temporary workers
- Work-from-home staff
- Labour-only subcontractors you oversee like employees
- Employees based abroad who spend more than 14 days continuously in Great Britain or more than 7 days on an offshore installation
Who doesn’t need employers’ liability insurance?
Some employers can be exempt from needing employers’ liability insurance. These include:
- Businesses that employ only the owner who also owns 50% or more of the company’s share capital.
- Family businesses where all the employees are close relatives of the owner, for example their husband, wife, son, daughter, stepfather, stepmother and so on.
- Most public organisations like government departments and NHS bodies.
Is employers' liability insurance a legal requirement?
Yes, employers’ liability insurance is a legal requirement in the UK. As soon as you hire your first employee, you must have employers’ liability insurance in place with an authorised insurer. Your policy must have a cover limit of at least £5 million under UK law.
Without employers' liability insurance, employers can face a fine of £2,500 for each day they are uninsured.
What does employers’ liability insurance cover?
Employers’ liability insurance will cover the legal costs including your solicitors’ fees as well as compensation costs owed to your employee if they’re unwell or have suffered an injury at work or as a result of their work for you. This could include:
- A broken wrist from tripping
- Repetitive strain injury from a poor workstation setup
- Back injury from lifting boxes
- Ongoing respiratory issues due to being exposed to mould in the office
Employers' liability insurance claim examples
Repetitive strain injury
After spending a prolonged period of time using their keyboard and mouse to code, a developer begins to suffer from repetitive strain injury and chronic wrist pain. Due to this, they require physiotherapy and will be unable to perform their usual work for some time.
Stress-related burnout
A project manager who has been working overtime as well as being on call during out-of-work hours due to a constantly high workload has been diagnosed with an anxiety disorder and depression. They take long-term sickness and claim that the nature of their job and the work environment caused their illness.
Broken arm
While on site, your employee trips and falls over data-centre cabling due to poor lighting and trailing leads. This results in them breaking their arm, which requires surgery and physiotherapy.
Manual-handling injury
While lifting a server, a member of your staff is injured. They were not given manual handling training and lifted too much weight using the wrong technique. They suffer from a slipped disc in their back which leaves them needing pain medication on a long-term basis as well as physiotherapy.
In each scenario, if your business is found liable, employers’ liability insurance can cover compensation and damages.
What other types of insurance should contractors consider?
- Professional indemnity insurance
- Public liability insurance
- Legal expenses insurance
- Directors’ and officers’ insurance
- Office insurance
- Cyber and data risks insurance
- Occupational personal accident insurance