If you employ anyone — even one person, even a family member, even part-time — you’re almost certainly required by law to have employers liability (EL) insurance. Most tradespeople know they need public liability insurance — EL is the one that catches people out.
This guide covers what EL insurance is, exactly who needs it, what it covers, how much it typically costs across different trades, and the common situations that trip tradespeople up.
Key Takeaways
- Employers liability insurance is a legal requirement under the Employers’ Liability (Compulsory Insurance) Act 1969 for any UK business that employs people
- The minimum legal cover is £5 million, though most policies default to £10 million
- Trading without it when required costs £2,500 per day
- EL is separate from public liability insurance — you likely need both if you have employees
- Labour-only subcontractors (those who work exclusively for your business) may count as employees for insurance purposes
- Sole traders working alone are generally exempt — but this changes the moment you take anyone on
What Is Employers Liability Insurance?
Employers liability insurance covers your legal costs and compensation payouts if an employee is injured, becomes ill, or dies as a result of working for you. It’s a mandatory policy for most UK employers — unlike public liability insurance, which is recommended but not legally required.
The distinction matters:
| Insurance Type | What It Covers | Legally Required? |
|---|---|---|
| Employers liability (EL) | Injury or illness suffered by your employees | Yes, if you employ anyone |
| Public liability (PLI) | Injury or property damage to clients/public | No (but expected by most clients) |
| Tool and equipment | Theft or damage to your tools | No |
| Professional indemnity | Claims arising from professional advice | No |
Most insurers offer combined policies that bundle EL and PLI together, which is how most tradespeople buy it.
Who Legally Needs Employers Liability Insurance?
The Employers’ Liability (Compulsory Insurance) Act 1969 sets the rules. According to the Health and Safety Executive (HSE), you must have EL insurance if you employ someone who:
- Works under your direction and control
- Uses your equipment or works at your premises
- Works for you regularly and can’t work for others at the same time
- Is paid a regular wage or salary by you
That last bullet catches a lot of people out. Labour-only subcontractors (often called LOSCs) — those who provide their labour but use your tools and work exclusively for you — can legally count as employees even if you don’t put them on PAYE payroll. If that describes anyone on your site or in your crew, get clarity from your insurer before assuming you’re exempt.
When You’re Exempt
You don’t need EL insurance if:
- You’re a sole trader working entirely alone
- You’re a limited company director with no other employees
- Your only employees are close family members (though this exemption is narrow and doesn’t apply in all cases — check with HSE)
- You employ domestic workers in a private home who work 40 hours or fewer per week
The exemption for sole traders is real, but it disappears the moment you take anyone on — even temporarily, even for a one-off job.
Employers Liability Insurance Costs by Trade
EL insurance is priced based on the number of employees, their wages (which determines the payroll), and the risk level of the work. Higher-risk trades pay more.
These are approximate annual costs for a small trade business with one or two employees:
| Trade | EL Insurance Cost (per year) | Risk Profile |
|---|---|---|
| Electrician | £200–£500 | Medium — working with live systems, confined spaces |
| Plumber | £200–£500 | Medium — water damage risk, working at height |
| Builder / general contractor | £400–£900 | High — multiple hazards, height, heavy materials |
| Roofer | £600–£1,500+ | High — significant fall risk |
| Heating engineer | £250–£600 | Medium-high — gas risk, confined spaces |
| Painter and decorator | £150–£400 | Medium — working at height, chemical exposure |
| Plasterer | £150–£400 | Lower — mainly manual effort, some height |
| Gardener / landscaper | £200–£500 | Medium — machinery, manual handling |
These figures are indicative. Your actual premium depends on your payroll, claims history, the number of employees, and your insurer. Industry quotes from specialist brokers like Simply Business and PolicyBee put small trade businesses in the range of £120–£1,200 per year for EL cover, with the higher end reserved for high-risk construction roles.
Most insurers bundle EL with PLI in a combined package. For most sole traders taking on a first employee, this bundled policy costs £300–£700 per year in total.
What Employers Liability Insurance Actually Covers
EL insurance activates when an employee makes a claim against you following an injury or illness caused by their work. It covers:
- Legal defence costs — solicitor and barrister fees if the case goes to tribunal or court
- Compensation payouts — if the claim succeeds, the insurer pays
- Medical expenses — if awarded as part of the settlement
It does not cover:
- The employee’s ongoing wages while they’re off sick (that’s separate income protection or sick pay)
- Injuries the employee caused to themselves through deliberate reckless conduct
- Claims by the public or your clients (that’s PLI)
- Damage to tools or equipment (that’s tools insurance)
The Subcontractor Question
This is where many tradespeople get caught out.
If you hire a subcontractor who brings their own tools, sets their own hours, works for multiple clients, and invoices you directly — they’re a genuine subcontractor and you likely don’t need EL for them.
But if that subcontractor:
- Uses your van and tools
- Works only for your business
- Takes direction from you on how and when to do the work
- Is paid by the day rather than by project outcome
…then the HSE may treat them as an employee, regardless of what it says in any contract. HMRC’s employment status tests (which overlap with HSE’s view) have caught out builders, roofers, and heating engineers who assumed a self-employed subcontractor arrangement removed their legal obligations.
When in doubt, ask your insurer. Most EL policies let you declare LOSCs as part of your payroll, giving you explicit cover.
The CIS Scheme and EL Insurance
If you operate under the Construction Industry Scheme (CIS), you’ll often be deducting tax from subcontractors’ payments. That relationship doesn’t automatically make them employees — but the working arrangements might. CIS status and employment status are two separate questions.
According to HMRC, a construction worker can be registered as a CIS subcontractor while still meeting the legal definition of an employee for HSE and insurance purposes. Don’t assume CIS registration lets you off the hook for EL.
The Penalty for Trading Without EL Insurance
The Health and Safety Executive enforces employers liability. Inspectors can visit sites, check documentation, and issue fixed penalties on the spot.
- £2,500 per day for every day you operate without valid EL insurance when it’s required
- £1,000 for failing to display a certificate of insurance (or make it accessible electronically)
According to the Health and Safety Executive’s published enforcement statistics, construction and trades are among the most frequently inspected sectors for EL compliance. The fines are automatic once an inspector identifies non-compliance — there’s no warning letter.
How to Get Employers Liability Insurance
For most small trade businesses, the process is straightforward:
- Get quotes from specialist trade insurers — try PolicyBee, Simply Business, Hiscox, or your trade association’s recommended provider. Avoid generic business insurance comparison sites where trade-specific risks aren’t always reflected accurately.
- Declare your payroll honestly — premiums are calculated on your total wage bill. Underestimating voids the policy.
- Include labour-only subcontractors if needed — ask the insurer directly about LOSCs and confirm whether they’re covered under your policy.
- Display your certificate — once you have cover, the certificate must be accessible to employees. GOV.UK says you can display it electronically rather than as a physical poster, but it must be accessible.
- Review it annually — if your team grows, your payroll changes, or you take on higher-risk work, your cover needs to reflect that.
Do You Need EL Insurance as a Sole Trader?
If you work alone, you don’t need EL insurance. There are no employees to protect.
But the moment you:
- Hire a labourer, even for one job
- Take on an apprentice
- Have a family member helping out on jobs
- Use a self-employed subcontractor who works exclusively for you
…the picture changes. The law is clear: employment creates liability.
Many sole traders grow their business gradually and forget to update their insurance. Taking on a first employee is the trigger point — don’t wait until the job is underway.
Frequently Asked Questions
Is employers liability insurance a legal requirement for all tradespeople? It’s required for any UK tradesperson who employs staff. Sole traders working alone are exempt, as are most limited company directors with no other employees. Once you take on any employee — full-time, part-time, or apprentice — the Employers’ Liability (Compulsory Insurance) Act 1969 applies.
How much does employers liability insurance cost for a tradesperson? Costs vary by trade risk level. Lower-risk trades like plasterers and painters typically pay £150–£400 per year for EL cover. Higher-risk trades like roofers and builders pay £400–£1,500 depending on payroll size and claims history. Most insurers bundle EL with public liability in a combined policy.
What’s the difference between EL and PLI for tradespeople? Employers liability covers claims from your employees — people who work for you. Public liability covers claims from your clients, customers, or members of the public. You almost always need both if you employ people and work in customers’ homes or on client sites.
Do labour-only subcontractors need to be covered under my EL policy? Possibly yes. Labour-only subcontractors who use your tools, work exclusively for you, and take direction from you may legally count as employees for EL purposes — even if you pay them as self-employed. Declare this to your insurer and confirm coverage explicitly.
What happens if I trade without employers liability insurance? The Health and Safety Executive can issue a fine of £2,500 for every day you operate without valid cover when it’s required. There’s also a £1,000 penalty for failing to display or make your certificate accessible. These are fixed penalties with no warning period.
Getting Your Business Set Up Right
Employers liability insurance is one part of the foundation you need when running a trade business with employees. It sits alongside public liability insurance, professional indemnity where relevant, and your CIS and tax obligations. If you work in construction, our guide to employers liability insurance for builders covers the construction-specific rules in more detail.
If you’re building a trade business, your online presence matters too. A professional website helps clients find you and builds the kind of credibility that gets you higher-value jobs. Check out what a tradesman website should include for a practical guide, or visit Digital Tradies — we build websites specifically for UK tradespeople from £49/month, no upfront cost, live in three days.
This article is for general information only and does not constitute legal or financial advice. Insurance requirements vary by business structure, trade, and circumstances. Always check with the Health and Safety Executive (hse.gov.uk) and your insurer for guidance specific to your situation.
