Do sole traders need employers’ liability insurance?

It’s one of those insurance questions that sounds like it has an obvious answer.  

You’re a sole trader. You work for yourself. You don’t employ anyone.  

So you don’t need employers’ liability (EL) insurance, right? 

Well, yes. Often that’s true. But not always. 

Being a sole trader doesn’t always mean working completely alone. And that’s where things can get a bit more complicated.  

If you ever bring in help, even occasionally, you could still need employers’ liability insurance.  

So before you tick the ‘not needed’ box and move on to other pressing matters, it’s worth understanding where to draw the line when it comes to EL.  

It’s the only legally required business insurance you’re likely to need…and hefty fines await those who are caught without it when they should have it.  

What is employers' liability insurance?

Employers’ liability insurance covers claims from people who become ill or injured because of the work they do for you. 

If they claim you were responsible, EL can help cover legal costs and any compensation you’re required to pay.  

In the UK, most businesses that employ people must have it by law. Except for the ones who only hire close family members. As well as a few other niche exceptions.  

So far, so straightforward.  

Why most sole traders assume they don't need EL

Most sole traders don’t think of themselves as employers.  

And in many cases, they’re right not to.  

If you genuinely work alone and never use anyone else’s help, employers’ liability insurance probably won’t be relevant to your business.  

But here’s where the confusion starts. ‘Employee’ doesn’t always mean someone on your payroll with a permanent contract… 

Do I need employers' liability insurance for everyone who works for me?

It’s not just about job titles. According to the Health and Safety Executive (HSE): 

"Whether you choose to call your contract a contract of employment or a contract for services is largely irrelevant. What matters is the real nature of your relationship with the people who work for you and the nature and degree of control that you have over the work they do." (From the Employers' Liability (Compulsory Insurance) Act 1969 - a brief guide for employers.)

In other words, the HSE doesn't differentiate between types of worker purely because of their tax status or your contractual relationship with them. 

What matters is how someone works with you, how much control you have over their work, and whether you effectively act as their employer.  

That means you could be a sole trader and still have responsibilities towards people who help you with their work.

Who counts as an 'employee'?

You might be surprised by some of the people that fall under the HSE’s definition of an employee. Depending on the circumstances, your employees can include: 

• temporary workers 
• seasonal staff 
• secondees 
• volunteers 
• work experience students 
• freelancers and subcontractors who use your equipment, work under your supervision, or follow your instructions. 

Using any one of these people could mean you need employers' liability insurance. So if you’re ever asking someone to lend a hand on a project, cover a busy period, or help out on-site, it’s worth checking whether you’d need EL for them first. 

And if you’re still not sure, you can call a broker – like us. It’s our job to guide you through the grey areas so you know you’re not missing anything crucial.  

A small cost now can save you a big headache later

Getting caught without employers’ liability insurance, when you should legally have it, can be expensive.  

Businesses can face fines of up to £2,500 for every day they were meant to have cover but didn't. As well as an extra £1,000 for not displaying your certificate somewhere where your employees can easily see it – whether that’s pinned up on a noticeboard or stored digitally. 

Really, you need EL as soon as you become an employer. So always think about insurance before you start working with people, rather than after.  

A quick check now could help you avoid an awkward conversation and potentially costly surprise later on.  

Sole support

So, to sum up. 

If you’re a sole trader who works alone and you never work with anyone else, you probably won't need to include employers’ liability in your sole trader insurance. 

But don’t assume that being a sole trader automatically means you’re exempt.  

If you use subcontractors, freelancers, temporary workers, volunteers, or anyone else to help with your work, there’s a chance you could still need EL cover.  

Before you take on an extra pair of hands, just make sure you've ticked all the legal boxes you need to. Because when it comes to employers’ liability insurance, the real question isn’t whether you’re a sole trader…it’s whether anyone works for you.  

And sometimes it turns out sole traders do need employers' liability insurance after all. 

Need more guidance? Find out more in our in-depth guide to EL or give us a call on 0345 222 5391. We’ll be happy to answer any lingering questions.  

Image used under license from Shutterstock.