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Do I need employers' liability insurance if I'm a sole trader with no staff?
A sole trader with no staff is outside the Employers' Liability (Compulsory Insurance) Act 1969. Here is when the UK duty starts and who is exempt.
What to take away
- A sole trader with no employees in England, Scotland or Wales has no legal duty to buy employers' liability insurance.
- The duty comes from the Employers' Liability (Compulsory Insurance) Act 1969 and starts when you employ anyone, including casual or part-time staff.
- A limited company with one director holding 50% or more of its shares is exempt, until someone else is hired.
- Clients, contracts and landlords can still insist on public liability or professional indemnity cover.
Who the 1969 Act actually covers
The Employers' Liability (Compulsory Insurance) Act 1969 requires employers in Great Britain to insure against claims from employees who are injured or made ill at work.
The Act applies in England, Scotland and Wales. Northern Ireland has its own legislation, so businesses there must check the separate rules.
GOV.UK guidance on employers' liability insurance states that cover must be at least £5 million and come from an authorised insurer.
The definition of an employee is broad. It takes in anyone you pay to work for you, including casual staff and some people who call themselves self-employed.
Sole trader employers' liability: the exemption
A sole trader with no staff sits outside the Act altogether. The duty falls on employers, and a one-person business has nobody to employ.
The exemption is narrow and it follows the work, not the paperwork. Take on one part-time worker and you become an employer with a compulsory insurance duty.
Employers' liability protects you against claims from staff. It does nothing for your own injury or illness, which needs separate cover such as personal accident or income protection.
If you work from a spare room, your household policy may exclude business use altogether, which is why many sole traders need separate insurance for home-based businesses.
When the exemption ends
Four changes usually trigger the duty:
- You hire your first employee, even for a few hours a week.
- You use labour-only subcontractors who work under your direction, which HSE treats as employment in some cases.
- You incorporate and take on anyone besides a single majority-shareholding director.
- You buy a business that comes with staff, or take on an apprentice.
The regulations contain narrow exceptions. HSE guidance on employers' liability insurance exemptions lists a company whose only employee owns 50% or more of its shares, and some family businesses where every member of staff is a close relative.
The tests turn on ownership and relationship, not job titles. Keep the share register, contracts and any insurer confirmation on file, because an exemption is something you may have to prove.
Which businesses must hold cover
The table summarises where the duty usually falls.
Employers' liability: who must hold cover
Business type
- Sole trader, no employees
- No
- Sole trader, one part-time employee
- Yes
- Sole trader, labour-only subcontractors
- Usually, if controlled
- Ltd, majority director, no other staff
- No, exemption
- Ltd with any other employee
- Yes
- Ltd, sole director under 50%
- Yes
Compulsory?
- Sole trader, no employees
- Sole trader, one part-time employee
- Sole trader, labour-only subcontractors
- Ltd, majority director, no other staff
- Ltd with any other employee
- Ltd, sole director under 50%
Contracts often settle the question before the law does. Larger clients, framework agreements and commercial landlords frequently insist on £5 million or £10 million of public liability before they will sign.
Public liability insurance costs for small businesses vary by trade, turnover and claims history, so compare quotes against the limit a contract demands rather than the lowest headline price.
Directors, family members and grey areas
A director counts as an employee of their own company. Where a company has staff beyond a single majority shareholder-director, it must hold cover, and the policy responds to claims those staff bring.
Limited company director liability insurance is a separate question from employers' liability. A policy covers the company's liability to its employees, not a director's own defence costs or personal injury.
HSE can prosecute individuals as well as companies. Where the answer is genuinely unclear, keep a written contract, an insurer's confirmation and advice from a qualified adviser.
This is general guidance, not legal advice; individual cases need a qualified adviser.
Common questions
Do I need employers' liability insurance if I'm a sole trader with no staff?
No. The duty in the 1969 Act applies to employers, so with no employees there is nothing to insure. That changes the day you take someone on, even casually.
Does a limited company with one director need employers' liability insurance?
Usually not, if the director owns 50% or more of the shares and the company employs nobody else. Hire a second person and the exemption falls away.
What is the penalty for not holding cover?
HSE records fines of up to £2,500 for each day without compulsory cover, plus up to £1,000 for failing to produce a certificate when asked.
Does the exemption cover me if I am injured at work?
No. Employers' liability insures your liability to employees, not your own injury. Sole traders need separate personal accident or income protection cover for that risk.
