The Federation of Small Businesses recently updated its own guidance on Employers' Liability insurance. Unlike most business cover, this one isn't optional, and the FSB's update is a useful reminder of exactly who it applies to.
Employers' Liability insurance is one of the few types of business cover that's a legal requirement in the UK, not just a sensible precaution. If your business employs anyone, it protects you against claims from staff who become ill or injured because of their work, and you as the employer are found responsible.
What the FSB's guidance says: "If you employ anyone, including part-time, temporary, or even volunteer staff, you are likely required by law to have this cover in place." The FSB also notes that legal fees and compensation payments from a single claim can run into tens of thousands of pounds, enough to put real financial pressure on a small business.
A common misconception is that Employers' Liability only matters once you've got a proper office and a payroll department. The FSB's guidance is explicit that it covers a much wider range of working relationships than most business owners assume:
If you're a sole trader with no staff at all, you're generally exempt. The moment you take on even one member of staff, that changes.
The penalty for not having it: Trading without Employers' Liability insurance when you're legally required to have it can result in a fine of up to £2,500 for every day you're without cover, on top of being personally exposed to the full cost of any claim.
Claims typically arise from workplace injuries, illnesses caused or worsened by working conditions, or, increasingly, stress and mental health claims linked to the workplace. The FSB's point about cost is the one that catches most small business owners off guard, a straightforward slip-and-fall claim can easily run past £10,000 once legal costs are included, and more serious injury claims can run into six figures.
UK law requires a minimum of £5 million of Employers' Liability cover, though most insurers default to offering £10 million as standard, since the cost difference between the two is usually small relative to the extra protection.
The FSB's own insurance guidance for members doesn't treat Employers' Liability in isolation, it's usually recommended alongside Public Liability (which covers claims from customers or members of the public, rather than staff) as part of a commercial combined policy. If you employ people and also deal with customers or the public on your premises, it's worth checking both are in place rather than assuming one covers the other.
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See My Cover Options →This article references publicly available guidance from the Federation of Small Businesses for context. CoverMatch is not affiliated with, and this article is not endorsed by, the FSB. Always check current legal minimums directly before making a decision.