Employers’ Liability insurance protects a business against claims for injury, illness, disease, or even death caused to an employee, as a result of their carrying on work for your business.
An insurer will pay out for any medical costs and damages incurred, as well as the legal fees associated with any claims made against you.
If you intend to employ anyone else via your company (rather than on a business-to-business basis), you must take out EL cover.
Is EL insurance compulsory for IT contractors?
Most businesses are required, by law, to have Employers’ Liability Insurance, even if it doesn’t outwardly seem necessary due to the line of business you’re in.
This obligation is contained in the Employers’ Liability (Compulsory Insurance) Act 1969 – see here.
All businesses must have at least £5 million of cover per claim (not in aggregate), although most insurers provide £10 million as standard.
You must display a valid certificate of insurance where employees can easily see or access it (e.g., in the office, on a website, on an intranet, or digitally for remote workers). Failure to display it properly is a separate offence.
If you are not adequately covered, you could be fined up to £2,500 for each day your business is not covered. Additional fines (up to £1,000) apply for not displaying the certificate or refusing to show it to inspectors.
Many IT contractors are exempt
Limited companies are exempt if:
- They have only one employee (usually the director), and
- That employee owns at least 50% of the issued share capital of the company.
Sole traders (and partnerships) are exempt if they have no employees at all, or their only employees are close relatives (defined in the Act as spouse, civil partner, parent, child, sibling, grandparent, grandchild, or step-relations in those categories).
If you later hire even one non-owner/non-qualifying employee (even part-time), the exemption ends immediately and cover becomes compulsory.
Other exemptions (e.g. certain family businesses not incorporated as limited companies, or employees based wholly outside Great Britain) are less common for IT contractors.
Despite the lack of a legal requirement in many cases, many limited company contractors decide to take out employers’ liability cover anyway.
What about if you are an umbrella company contractor?
If you are an umbrella company contractor, your provider is the employer of record, so they must carry Employers’ Liability insurance for you (as their employee).
It is automatic and usually includes at least £10 million cover. You do not need your own separate policy unless you have additional staff outside the umbrella arrangement. Check with your umbrella provider if unsure.
Is employers’ liability insurance worth it?
Even if you don’t have to take out EL cover, there are several reasons you should.
Clients and agents often insist that contractors have business insurance. This typically includes professional indemnity, public liability, and employers’ liability insurance.
Having Employers’ Liability (even when not strictly required) strengthens your “in business on own account” position under IR35/off-payroll rules.
HMRC and tribunals often view appropriate business insurances (including EL, public liability, and PI) as indicators of genuine self-employment/contracting rather than disguised employment.
Many end clients and recruitment agencies now explicitly require proof of EL cover in their supplier packs, regardless of legal exemption, to cover their own supply chain risks.
How do I get a quote?
EL insurance is rarely sold standalone for contractors. It’s almost always bundled with contractor/small business packages, including public liability and professional indemnity.
You may find that the cost of purchasing public liability and Professional Indemnity as separate policies may be higher than buying a combined business liability policy.
Typical cost for a sole-director limited company contractor (even if exempt) is low—often £50–£150 annually when bundled, depending on turnover and activities.
You can get a quote via our long-term insurance partner, Qdos.
For official guidance, see the GOV.UK page on Employers’ liability insurance.
Professional Indemnity Insurance for Contractors
Industry leading PI insurance - from just £13.50 per month via Qdos. Business liability and IR35 insurance cover also available.
