Employers' Liability Insurance: When Trades Need It

Employers’ Liability Insurance: When a Trade Legally Needs It

If you employ anyone, you almost certainly need employers’ liability insurance by law, and the fines for not having it are charged by the day. The rule comes from the Employers’ Liability (Compulsory Insurance) Act 1969, and it catches far more small trade firms than the word “employ” suggests — labour-only subcontractors and casual weekend help often count.

What employers’ liability actually covers

Employers’ liability (EL) covers your legal liability if someone working for you is injured or made ill because of that work, and they claim against you. It pays their compensation and your legal costs.

It is not the same as public liability, which covers injury or damage to members of the public and their property. A homeowner tripping over your cable is public liability. Your apprentice falling off your steps is employers’ liability. Plenty of trades hold the first and assume it covers the second. It does not.

Who legally needs it

You need EL cover if you employ one or more people, unless a specific exemption applies. The Health and Safety Executive enforces this, and it is one of the few insurances that is genuinely compulsory rather than merely sensible.

The word “employ” is broader than a signed contract of employment. In practice you are likely to need cover if:

You have anyone on PAYE, full or part time.

You take on an apprentice.

You use casual or seasonal labour — the lad who helps on Saturdays counts.

You engage labour-only subcontractors who work under your direction, using your materials and equipment.

The sole-trader exemption, and where it stops

A genuine one-person business with no employees does not need employers’ liability insurance. If it is only ever you in the van, on your own tools, working for your own customers, the Act does not apply to you.

The exemption also generally covers companies where the only employee is also the sole shareholder — the classic one-person limited company.

Where it stops is the moment anyone else works under your control. That includes:

The first day you take on an apprentice.

A mate who helps you lift a boiler in and gets paid cash for the day.

A family member helping out, if they are not covered by a family-business exemption.

A labour-only subcontractor you supervise.

The exemption is about the shape of the working relationship, not the job title on an invoice. This is the single biggest misunderstanding in small trade firms.

How subcontractors are treated

This is where trades get caught, so it is worth being precise.

Labour-only subcontractors turn up and provide their labour. You tell them what to do, you supply the materials, and often the tools and plant. For insurance purposes they are usually treated like employees, and your EL policy needs to cover them.

Bona fide subcontractors run their own businesses. They quote for the work, carry their own public liability insurance, use their own tools and materials, decide how the job gets done, and can send a substitute. They should be covered under their own policies, and you should be collecting proof of that.

The test insurers apply is about control and independence, not about what the paperwork says. Calling someone a bona fide subcontractor while directing every hour of their day does not make them one.

Two practical habits protect you: tell your insurer honestly how you use subcontractors, and keep a copy of every subcontractor’s insurance certificate on file, with a diary note of the renewal date.

What it costs and what to check

Premiums depend on your trade, your wage roll, and your claims history. Roofing and groundworks cost more than domestic decorating for obvious reasons.

Three things worth checking on any quote:

The limit of indemnity. Policies are commonly written at £10 million, which is the standard market level. Do not accept less without a good reason.

Who is defined as an employee. Read the wording. It should explicitly include labour-only subcontractors, apprentices and casual workers if you use them.

Working-at-height and hot-works conditions. Many trade policies limit or exclude work above a certain height, or impose conditions around hot works. If you fit fascias or use a blowtorch, check.

The penalties for not having cover

The Health and Safety Executive can fine a business for each day it operates without valid employers’ liability insurance. Inspectors can ask to see your certificate, and there is a separate penalty for refusing to produce it.

The bigger risk is not the fine. If an uninsured employee is seriously injured, the compensation claim comes directly out of your business and, if you are a sole trader, your personal assets. That is the scenario that ends small firms.

You must also keep your certificate accessible to employees. Displaying it in the van or on the office wall is traditional; keeping it where staff can read it electronically is accepted.

A short checklist

Before your next job with anyone else on site, run through this:

Is anyone working under my direction today? If yes, EL is in scope.

Does my policy name labour-only subcontractors and apprentices?

Do I hold current insurance certificates for every bona fide subcontractor?

Is my certificate available to everyone who works for me?

Have I told my insurer about any change in wage roll or trade activity?

Getting the work to justify the cover

Insurance is a cost you carry whether or not the phone rings, which is why trades hesitate before taking on their first employee. The honest answer is that the cover is cheap relative to the risk — the harder problem is keeping enough work coming in to keep another pair of hands busy.

Trade Pilot only charges when a real local job lands in your inbox, and sells each lead to no more than three trades in an area. There is no monthly membership to carry through a quiet month, which makes it easier to plan around a growing wage bill.

Frequently asked questions

Do I need employers’ liability insurance as a sole trader with no staff?

No. A genuine one-person business with no employees is exempt. The moment you take on an apprentice, casual help or a labour-only subcontractor, you almost certainly do need it.

Does my public liability policy include employers’ liability?

Not automatically. They are separate covers, although insurers often sell them together as a combined trade policy. Check your schedule — if employers’ liability is not listed with its own limit, you do not have it.

Are labour-only subcontractors covered by employers’ liability?

Usually yes, because they work under your control. Tell your insurer you use them and make sure the policy wording includes them.

What if my subcontractor has their own insurance?

If they are a genuine bona fide subcontractor running their own business, their policies should respond. Collect and keep the certificate. If they work under your direction, their own cover does not remove your obligation.

How long do I have to keep old certificates?

Keep them. Industrial disease and long-tail injury claims can surface many years after the work, and the certificate for the relevant year is what identifies which insurer responds. Scan them and keep them indefinitely.

Does a family member helping out count as an employee?

There is a narrow exemption for family businesses, but it is easy to get wrong and it does not apply to incorporated companies. If a relative works for you regularly, speak to your broker rather than assume.

Related reading: do you legally need public liability insurance? · public liability insurance for tradespeople · payroll for your first employee · taking on an apprentice