Do I Need Employers' Liability Insurance?

Yes — the moment you employ anyone. Employers' liability insurance is one of the few business insurances the UK actually requires by law: as soon as you take on staff, you must hold it, with a statutory minimum of £5m cover. Trading without it risks a fine of up to £2,500 for each day you're uninsured. There's a narrow exemption for unincorporated businesses that employ only close family — but it does not apply to limited companies, which is the point most often missed.

Sole trader, no staff?No

Not required by law

Employ anyone?Yes — by law

Minimum £5m cover

Limited company?Yes*

Even family employees

*The close-family exemption applies only to unincorporated businesses (sole traders and partnerships). Limited companies must hold cover even where the only employee is a family member.

When it becomes the law

For most businesses, employers' liability is the one insurance the law compels. Under the Employers' Liability (Compulsory Insurance) Act 1969, as soon as you employ someone you must hold employers' liability insurance, with a statutory minimum of £5m cover from an authorised insurer. This applies even to a single part-time worker or an apprentice — the trigger is employing a person, not the size of your business or how many hours they work.

If you're a sole trader with no employees, none of this is mandated: the requirement is switched on the moment you take someone on, not by trading in itself.

The £5m minimum and the penalty

The cover must be at least £5m and must come from an authorised insurer. The enforcement is real: trading without required employers' liability cover risks a fine of up to £2,500 for each day you're uninsured. You're also required to have a certificate of insurance and to make it available to your employees — the detailed certificate rules sit with the same legislation, so check the current requirements with HSE or GOV.UK (linked below) rather than relying on a figure from memory.

The exemption — and why limited companies don't get it

There is one exemption, and it's narrow: unincorporated businesses (sole traders or partnerships) that employ only close family members. It does not apply to limited companies — so a business that trades as a limited company needs employers' liability cover even if the only person it employs is a spouse or child.

This is the point most often missed. Incorporating and then employing a family member feels like it should fall under the family exemption, but the exemption never reaches a limited company. If you've set up a limited company and put a family member on the books, assume you need the cover.

You run your business as a limited company and the only person on the payroll is your spouse. You assume employing family means you're exempt — many people do. But the close-family exemption applies only to sole traders and partnerships, never to limited companies. So your company is legally required to hold employers' liability insurance at £5m, and every day it trades uninsured risks a penalty of up to £2,500 — despite the only employee being family.

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Frequently asked questions

Do I legally need employers' liability insurance?

Yes, as soon as you employ anyone. Under the Employers' Liability (Compulsory Insurance) Act 1969 you must hold employers' liability insurance the moment you take on staff, with a statutory minimum of £5m cover from an authorised insurer. It applies even to a single part-time worker or an apprentice.

I'm a sole trader with no employees — do I need it?

No. With no staff, employers' liability insurance isn't required by law. The requirement is triggered by employing someone, not by trading in itself. (You may still want public liability or other cover, but that's separate and not legally mandated.)

Does the close-family exemption apply to my limited company?

No. The exemption for employing only close family members applies solely to unincorporated businesses — sole traders and partnerships. It does not apply to limited companies, so a limited company must hold employers' liability cover even if its only employee is a spouse, partner or child.

How much cover do I need and what's the penalty for not having it?

The statutory minimum is £5m of cover from an authorised insurer. Trading without required employers' liability cover risks a fine of up to £2,500 for each day you're uninsured.

Do I need it for part-time workers or apprentices?

Yes. The requirement applies even to a single part-time worker or an apprentice — it isn't limited to full-time employees.

Related guides

The requirement to hold employers' liability insurance, the £5m statutory minimum, the certificate rules and the up-to-£2,500-a-day penalty all come from the Employers' Liability (Compulsory Insurance) Act 1969 — see the HSE guidance on employers' liability insurance and GOV.UK, “Employers' liability insurance”. The close-family exemption applies only to unincorporated businesses (sole traders and partnerships) and does not apply to limited companies, per the same guidance.