Employers' liability insurance

Conditions

1. Employers' liability insurance is compulsory for most businesses with employees. GOV.UK's guidance says you must get it as soon as you become an employer. Cover must be for at least £5 million from an authorised insurer.
2. Who counts as an employee: the Employers' Liability (Compulsory Insurance) Act 1969 defines an employee as an individual who has entered into or works under a contract of service or apprenticeship with an employer, whether the contract is expressed or implied, oral or in writing. Whether a particular casual worker has such a contract depends on the facts, so check with your insurer or an adviser if you are unsure.
3. The penalty for operating without the required EL insurance is a fine of £2,500 for each day on which the business has employees but lacks the required cover. A separate fine of £1,000 applies for failure to display the EL certificate where employees can access it — for example at your workplace, on your website or work intranet — or for failure to show the certificate to an inspector when asked. Both figures are confirmed in GOV.UK's employers' liability insurance guidance.
4. EL insurance is not required if you only employ family members. GOV.UK lists these as a husband, wife, civil partner, father, mother, grandfather, grandmother, step-father, step-mother, son, daughter, grandson, granddaughter, step-son, step-daughter, brother, sister, half-brother or half-sister. The Employers' Liability (Compulsory Insurance) Act 1969 words this exemption by the employer's own relationship: it covers an employee of whom the employer is the husband, wife, civil partner, father, mother and so on. That wording fits an employer who is an individual, such as a sole trader. The sources quoted here do not say how it applies to a limited company whose only employees are relatives of its director, so a company should not assume it is exempt on that ground — check with your insurer or an adviser.
5. A separate exemption for companies is not on GOV.UK's page. Schedule 2 to the Employers' Liability (Compulsory Insurance) Regulations 1998, at paragraph 15 inserted by SI 2004/2882, exempts any employer which is a company that has only one employee and that employee also owns fifty per cent or more of the issued share capital in that company. On its wording it covers only a company with that one employee.
6. Employees based abroad: GOV.UK says you do not need EL insurance if you only employ someone who is based outside England, Scotland and Wales. The 1969 Act words this differently — it does not require an employer to insure in respect of employees not ordinarily resident in Great Britain, except as otherwise provided by regulations — so if this applies to you, check with your insurer or an adviser. Schedule 2 to the 1998 Regulations also exempts certain public bodies and other specified employers.
7. For tax, HMRC's Business Income Manual (BIM45525) says that where an employer insures against general liability under the law to pay compensation, the premiums are allowable as a deduction, because the payments are not capital expenditure and are incurred wholly and exclusively for the purposes of the trade. The wholly and exclusively rule is section 34 ITTOIA 2005 for a sole trader and section 54 CTA 2009 for a company.
8. There is no longer a legal requirement to keep the EL certificate for a set period. The duty to retain each certificate for 40 years was regulation 4(4) of the Employers' Liability (Compulsory Insurance) Regulations 1998, and it was omitted with effect from 1 October 2008. What the law still requires is that you display the certificate where employees can access it and show it to an inspector when asked.
9. Employees cannot claim EL insurance premiums: the 1969 Act puts the duty to insure on the employer, so the cost is the employer's. Separately, section 346 ITEPA 2003 allows an employee a deduction for a premium under a qualifying insurance contract that indemnifies them against their own liabilities related to the employment — a different kind of policy from EL insurance.

Common mistakes

• Assuming EL insurance is the same as public liability insurance — they cover different parties. EL covers claims from employees who are injured or become ill because of their work; public liability covers claims from members of the public or third parties.
• Assuming a part-time or temporary worker does not count. Under the 1969 Act, what matters is whether they work under a contract of service or apprenticeship, and GOV.UK says the duty to insure starts as soon as you become an employer.
• Failing to display or make the EL certificate accessible to employees, which carries a separate £1,000 fine even where a valid policy is in place.

What to keep

• Employers' liability insurance certificate — display it where employees can access it and show it to inspectors on request.
• Premium invoices or payment records.
• Evidence of employee headcount, in case of a query about whether the requirement applied.

Real-world example

A sole trader takes on two employees in April 2026. She immediately obtains EL insurance at a cost of £650 per year, providing £5 million cover as required by law. The premium is an allowable business expense. She makes the certificate accessible to staff via a link on the team's shared intranet. In prior years, when she was the only person in the business, no EL cover was required.

Frequently asked