HR & People
IR35 without the panic: A Plain-English guide
A plain-English guide on IR35 for newly incorporated contractors and freelancers.
Employers’ Liability Insurance: Do You Need It?
Do you need employers’ liability insurance? Learn when cover is compulsory, the £5 million minimum and exemptions for solo founders and family businesses.
By Hugo Brooks2 October 20263 min read
Hiring your first employee? Employers’ liability insurance should usually be in place from their first day of employment.
It protects your business against compensation claims for work-related injury or illness. Most employers need it by law, but there are exemptions, including some solo founder companies.
What does it cover?
Employers’ liability insurance helps cover compensation and legal costs when an employee claims that their work caused an injury or illness.
Claims can involve current or former employees. An illness may only become apparent years after someone leaves, so keep your insurance records.
This is different from public liability insurance, which covers claims from members of the public or other businesses.
Who needs it?
Most businesses employing staff in Great Britain must have cover. This includes part-time, temporary and casual employees, not just full-time staff. Individuals working from home doesn’t remove the requirement.
Freelancers and contractors need closer consideration. Calling someone “self-employed” doesn’t settle their status for insurance purposes. The actual working relationship matters, including how much control you have over their work and whether they can send a substitute.
If you’re unsure, explain the arrangement to your insurer or broker before they start.
Hiring also brings other responsibilities. Our guides to PAYE registration and workplace pensions cover the next steps.
What if you’re a solo founder?
A limited company is exempt if its only employee owns at least 50% of its issued share capital. For example, if you own 100% of your company and are its only employee, you generally don’t legally need employers’ liability insurance.
Review this before hiring anyone else. Some client contracts may also require cover even when a legal exemption applies.
How much cover do you need?
The legal minimum is £5 million, from an authorised insurer. Check that the policy covers your business activities and everyone who needs to be included. Tell your insurer when your workforce or the work you do changes.
Once insured, you must display your certificate where employees can easily access it. An electronic copy is acceptable if staff can access it, and you must show it to inspectors when asked.
What happens if you don’t have it?
You can be fined £2,500 for each day you’re without the required insurance. Failing to display the certificate or provide it to inspectors can also lead to a fine of £1,000.
Without cover, your business may have to fund compensation and legal costs itself.
How much does it cost—and how do you get it?
There’s no fixed price. Premiums depend on your workforce, business activities, claims history and the cover you choose.
Get a quote based on your actual circumstances rather than budgeting a set amount per employee.
Through FOUNDRS, members can connect with insurance partner Premierline for help finding suitable cover. Access support through the FOUNDRS platform.
