Do I Need Employers’ Liability Insurance if I Have No Employees

If you run a small business or work for yourself in the UK, you might wonder — do I need Employers’ Liability Insurance if I have no employees? In most cases, the answer is no, but there are important exceptions. Understanding when the law requires this insurance helps you stay compliant, avoid fines, and protect your business reputation.

What Is Employers’ Liability Insurance and Why Is It Important in the UK?

Employers’ Liability Insurance is a legal requirement for most businesses in the UK that employ staff. It protects employers against claims made by employees who suffer injury, illness, or damage as a result of their work. Even small businesses and startups must understand this law to stay compliant and safeguard their finances.

What does Employers’ Liability Insurance cover?

Employers’ Liability Insurance covers compensation and legal costs if an employee becomes injured or ill because of their job. This could include:

• Workplace accidents or injuries

• Occupational diseases caused by working conditions

• Compensation payouts for loss of income or medical costs

• Legal defence costs if the claim goes to court

For example, if an employee slips on a wet floor in your office and breaks a leg, your Employers’ Liability policy would handle the compensation and legal expenses.

Why is Employers’ Liability Insurance legally required under UK law?

The Employers’ Liability (Compulsory Insurance) Act 1969 requires most employers to hold this insurance. It ensures businesses can pay compensation if an employee is injured or made ill at work.

The minimum cover required by law is £5 million, though most insurers provide £10 million as standard. The Health and Safety Executive (HSE) enforces the law and can fine businesses £2,500 per day for each day they are uninsured. Failing to display or produce your insurance certificate can incur an additional £1,000 fine.

This law protects both employers and employees by ensuring fair compensation and business continuity after accidents.

How does it differ from other types of business insurance?

While Employers’ Liability covers your employees, other business insurances protect against different risks:

As James Clarke, Chartered Insurance Broker at Aviva, explains:

“Many sole traders assume they don’t need Employers’ Liability Insurance, but if they use labour-only contractors or volunteers, they could still fall under the definition of an employer.”

Do I Need Employers’ Liability Insurance if I Have No Employees?

What counts as an ’employee’ under UK law?

The legal definition of an employee is broader than most people assume. You might still be considered an employer if you:

• Control how, when, and where a person works.

• Provide their equipment, uniform, or materials.

• Require them to follow your procedures or represent your business.

In such cases, even individuals without formal contracts — like casual helpers or temporary assistants — might be legally seen as employees. The safest approach is to assess the working relationship, not just the job title.

Are contractors or freelancers considered employees for insurance purposes?

In general, independent contractors or freelancers working under their own business name and holding their own insurance are not your employees. However, if they:

• Work exclusively for your business,

• Follow your specific instructions, or

• Use tools and materials you provide,

then the HSE may classify them as employees for liability purposes.

Do family members or volunteers require Employers’ Liability cover?

If you are a sole trader or partnership employing only close family members (like your spouse or children), you’re usually exempt. But if your business is a limited company, the rules change. Even if your only worker is your spouse or sibling, the company is considered a separate legal entity — meaning Employers’ Liability Insurance becomes mandatory.

Volunteers are another area of confusion. If volunteers perform tasks similar to paid employees, courts may treat them as employees in case of injury. Therefore, having cover for volunteers is strongly advised.

What if I use agency workers, interns, or temporary staff?

Agency workers are typically covered by the agency’s insurance policy. However, if your business directly supervises them, you might share responsibility for their welfare. Interns and work-experience students also fall under “employees” in many cases, particularly if you assign duties or provide instructions.

The best practice? Always clarify insurance responsibilities in your contract with any third party.

When Is Employers’ Liability Insurance Not Required in the UK?

What are the legal exemptions under the Employers’ Liability Act 1969?

You may not need Employers’ Liability Insurance if:

• You are a sole trader with no staff.

• Your company employs only family members and is not a limited company.

• You own 50% or more of a limited company and have no other employees.

• You are a public organisation or government body already covered by statutory indemnity.

Are sole traders required to have Employers’ Liability Insurance?

No, sole traders are typically exempt unless they hire or supervise someone else’s work. But even without employees, risks still exist. You could be held responsible for injuries to clients, customers, or subcontractors.

That’s why many sole traders in the UK invest in Public Liability Insurance — it protects them from third-party claims that Employers’ Liability wouldn’t cover.

Can partnerships or limited companies operate without Employers’ Liability Insurance?

Partnerships that employ only the partners themselves can operate without Employers’ Liability Insurance. However, once you bring in an external employee — even part-time — the requirement applies.

For limited companies, the rule is stricter. If your company has more than one director, or even one employee who doesn’t own 50% of the shares, you must have cover.

What Are the Risks of Not Having Employers’ Liability Insurance?

What fines and penalties could a business face?

Failing to hold valid Employers’ Liability Insurance can result in:

• A £2,500 fine per day for each day without insurance.

• A £1,000 fine for not displaying your certificate of insurance.

The HSE conducts spot inspections, and you must show your certificate immediately upon request.

How could a single claim impact your business financially?

Without cover, you must pay any compensation and legal fees yourself. Even small injury claims can reach £20,000–£50,000, while serious illness or disability claims can exceed £250,000.

As Helen Bryant, Risk Consultant at AXA UK, warns:

“One workplace accident could bankrupt a small business overnight. Employers’ Liability Insurance isn’t just a legal requirement — it’s financial survival.”

How can lack of insurance damage your business reputation and contracts?

Clients, suppliers, and government tenders often demand proof of insurance. Not having it can:

• Disqualify you from contracts.

• Damage your business reputation.

• Reduce client trust and confidence.

Insurance isn’t just protection — it’s also a credibility marker in the professional world.

What Alternatives Exist if You Have No Employees but Still Want Protection?

Should self-employed professionals consider Public Liability Insurance instead?

Yes, Public Liability Insurance is essential for those interacting with the public. It covers third-party injuries or property damage — for example, if a client trips over your equipment during a home visit or you accidentally damage a customer’s property.

It’s especially valuable for tradespeople, event organisers, and consultants who work directly with clients or the public.

Is Professional Indemnity Insurance suitable for freelancers?

Absolutely. Professional Indemnity Insurance protects you if your client suffers financial loss due to your work or advice. It covers legal defence costs and compensation payments.

If you’re a consultant, designer, accountant, or marketing specialist, this insurance can save your business if a project goes wrong.

What additional policies might small business owners consider?

Depending on your business type, you may also consider:

• Business Contents Insurance – covers your office equipment.

• Cyber Liability Insurance – protects against data breaches or cyberattacks.

• Tool Insurance – ideal for tradespeople to cover lost or damaged tools.

How to Choose the Right Business Insurance if You Have No Employees

What factors should influence your choice of insurance?

Before purchasing any insurance, evaluate:

• The nature of your work

• Your client requirements

• Your exposure to public risk

• Your business assets and income level

How can comparing quotes help reduce insurance costs?

Comparing insurance quotes across providers can help you save up to 30–40% annually. Online comparison tools like Simply Business or MoneySuperMarket let you evaluate multiple policies side-by-side to find the best value for your needs.

Should you consult a business insurance broker or adviser?

Yes. Insurance brokers can tailor advice to your business structure, ensuring you stay compliant and fully protected.

As Richard Hayes, Insurance Specialist at Simply Business, says:

“Tailored advice often saves small business owners hundreds each year and ensures full legal compliance.”

Conclusion: Do You Really Need Employers’ Liability Insurance if You Have No Employees?

In the UK, you don’t need Employers’ Liability Insurance if you have no employees and meet exemption criteria. However, if you work with contractors, volunteers, or family members, check whether they legally count as employees. Even when it’s not mandatory, consider other policies like Public Liability or Professional Indemnity Insurance to protect your livelihood.

Ultimately, understanding your legal duties and risk exposure keeps your business compliant, professional, and financially secure.

FAQs

1. Does a company with no employees need Employers’ Liability Insurance?

No, a company with no employees and meeting exemption criteria isn’t legally required to have Employers’ Liability Insurance.

2. Do I need Employers’ Liability Insurance if I only use subcontractors?

You only need it if you use labour-only subcontractors who work under your control and use your tools or materials.

3. Am I not legally obliged to have business insurance if I have employees?

Yes, if you employ anyone, you are legally required to hold at least £5 million Employers’ Liability Insurance under UK law.

4. Do I need Employers’ Liability Insurance as a sole trader?

No, sole traders without employees don’t need Employers’ Liability cover unless they hire or supervise others.

5. Do I need Employers’ Liability Insurance for a limited company?

Yes, unless you’re the sole director owning 50% or more of the shares and have no other employees.