Employers' liability insurance: £5m rule in Great Britain

Employers' liability insurance is a legal duty in Great Britain, and the £5 million minimum comes from the 1998 Regulations, not from the FCA. The table gives the main positions at a glance; the sections after it explain each one.

If cover is missing, enforcement can follow

Going uninsured can bring a fine of up to £2,500 for each day without cover, imposed on conviction. Failing to display the certificate, or refusing to show it to an inspector, can bring a separate fine of up to £1,000. The HSE enforces the duty in Great Britain, while local authorities oversee some premises, including retail and offices; the guide to compulsory cover and distribution duties maps who does what. Inspectors may demand a certificate and prosecute; directors can face personal liability in some cases.

Serious injuries should be reported through RIDDOR. The compulsory insurance rules also explain disclosure and record duties, alongside the Act's insurance and enforcement requirements for employers across Great Britain.

The first employee changes the position

For most employers in England and the rest of Great Britain, cover is compulsory from the first employee's start date under the Employers' Liability (Compulsory Insurance) Act 1969. The £5 million minimum is set by the 1998 Regulations—the Employers' Liability (Compulsory Insurance) Regulations 1998—not by the FCA; most insurers provide £10 million as their standard limit.

An employee works under a written or verbal contract of service. The duty reaches full-time, part-time, temporary and casual staff, and can extend to labour-only subcontractors. Directors with a service contract may qualify; a controlling director who is not an employee may sit outside the obligation. GOV.UK says even one employee is enough and describes limited exemptions.

Cover addresses liability for an employee's death, injury or disease suffered at work. The legal trigger is the first employee's start date, so arrange the policy before that day, not after the first pay run.

A sole trader with no employees falls outside the 1969 Act, although clients may still ask for public liability cover. The duty begins when one or more people are employed, so review the position for a sole trader with no staff before arranging insurance.

When family ownership is not enough

The close-family exemption sits in section 2 of the 1969 Act. It covers employees of whom the employer is the spouse, civil partner, parent, grandparent, step-parent, child, grandchild, step-child, brother, sister, half-brother or half-sister. That wording describes people, so it helps sole traders and partners, not limited companies.

A limited company therefore still needs cover for family employees, even when every employee is a relative and every share is held by the family. HSE guidance also describes a separate exemption for a company whose only employee owns at least half of its shares; check leaflet HSE40 before relying on it.

No application is made to activate either route. The FCA and PRA authorise insurers, but they do not grant or record whether an employer is exempt.

Limits, premiums and placing the policy

Regulation 3 of the 1998 Regulations sets the £5 million minimum for claims arising out of any one occurrence; the table's "per claim" is shorthand for that. It is not necessarily a sufficient limit, and higher-risk trades may need more. There is no fixed premium; payroll, trade, staff numbers, claims history, subcontractor use and work at height affect price. The cost guide works through an illustrative premium line by line, and pricing structures explains payment timing.

Cover often sits within a commercial combined policy, alongside public liability for customers and visitors. A two-person consultancy pays much less than a roofing firm with ten staff. Ask a broker for a written quote, and compare the cover terms rather than price alone.

Certificates remain important after renewal

Display the certificate where staff can see it or provide digital access, then keep each certificate for as long as you can, including records from previous insurers. The legal duty to retain certificates for 40 years was removed in 2008, but old certificates remain the best evidence in a late disease claim, and 40 years is still a sensible archive period. Produce it to an HSE inspector on request. The long period reflects industrial disease claims, including asbestos-related conditions, which can emerge decades after exposure.

A missing document can make a business appear uninsured for the years it relates to, so keep certificates from earlier insurers in the same archive as the current one.