Whatever your line of work is, all small businesses carry an element of risk which can affect you, your staff and the general public.

There are approximately 5 million small to medium businesses within the UK and around 2.15 million small businesses registered for VAT or PAYE in the UK as of March 2010.  Of these, 58.9% are registered as a corporate business and 23.08% as a sole trader.

The employment rate of working age population as of October 2010 was around 70.6% and it found that smaller businesses provided approximately 60% of jobs within the UK.

We could assume that 1,266,350 of UK small businesses hold Employers Liability Insurance (EL), but this is not the case.

Some businesses operate illegally because they are not covered with the correct insurances to protect themselves and their employees.  This may simply be due to lack of knowledge or it could be down to ignorance, but the importance of Employers Liability insurance must not be misunderstood.

Employers Liability Insurance

Employers Liability (Compulsory Insurance) Act 1969 protects a business and its owner from any liability claims made by employees who have been injured at work or suffered a work related disease.

Employers Liability insurance is a legal requirement which will cover the cost of compensation if an employee suffers an injury, illness or disease whilst at work, even if they have followed the correct instructions.

Any business that has employees must obtain the correct employers liability insurance cover. Failure to arrange the cover you require could leave a business susceptible to substantial penalties amounting to £2,500 for each day it has traded without Employers Liability insurance and/or sometimes imprisonment up to a maximum of 14 years.

Previous Employers Liability records and certificates should never be disposed of, as claims can arise months or years later, due to various diseases taking a long time to develop.

How to purchase Employers Liability Insurance

Employers Liability Insurance is rarely bought as a standalone policy as it is generally combined with Public Liability insurance. Public Liability is an optional policy but it is a valuable purchase if the business comes into contact with the general public as claims can be made by individuals who have either been injured or had their property damaged as a result of the business operations.

Health & Safety

A business employs staff to carry out and contribute to its business activities and or operations. As an employer you are responsible for the health and safety of employees and are required by law to ensure that they are protected whilst at their place of work.

To minimise the risk of a liability claim, planning and implementing a robust Health and Safety policy and strategy is essential this will include but is not limited to frequent risk assessments.

2009/10 figures showed that:

  • 152 workers suffered fatal injuries at work, resulting in a loss of 28.5 million working days;
  • 1.3 million people suffered from an illness believed to have be caused/made worse by their current or past jobs resulting in 23.4million lost days
  • 121,430 other employee injuries were reported under RIDDOR*, resulting in a loss of 5.1 million working days

The above consequences would not be covered by an Employers Liability policy but would be managed with an effective and efficient Health and Safety strategy.  Additionally, the Health and Safety Executive (HSE) perform random inspections to ensure that the working areas are safe and comply with regulations and they will also require a valid Employers Liability certificate – which should always be visible to employees.

New regulations mean that it can be displayed in electronic format.


  • A sole trader, with no staff will not need to acquire an Employers Liability policy due to not having any employees.  But if you have work experience students and voluntary/unpaid ‘helpers’ they will be classed as an employee and Employers’ Liability Insurance will then be required.
  • A family business will not need to obtain Employers Liability – Unless it is incorporated as a Limited Company.
  • Most public organisations will not require Employers Liability – Government Departments and Agencies, Local Authorities, Police Authorities and Nationalised Industries and Health Service bodies – National Health Service Trusts, Health Authorities.

An increased premium is a better option than a large fine or ultimately jail, so if you are in business and in doubt whether or not you should have Employers Liability insurance, call our insurance specialists for an informal discussion today.

The purpose of this article is to give you the reader an understanding. It is not a legal interpretation of the Employers’ Liability (Compulsory Insurance) Act and has no formal legal status.

Sources: HSE.gov.uk, statistics.gov.uk, bis.gov.uk

* RIDDOR – The Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 1995