Legal & Lawsuits
5 min read • Updated October 2026
Do sole traders need employers' liability insurance?
Quick Answer / Executive Summary
Only once you employ someone. A sole trader working alone does not need employers liability insurance, but under the Employers' Liability (Compulsory Insurance) Act 1969 you must carry at least £5 million of cover as soon as you have an employee. GOV.UK says fines can reach £2,500 for every day you are uninsured and £1,000 for not displaying the certificate. See our sole trader insurance guide for how this fits with other covers.
Key Takeaways at a Glance
- No employees means no legal duty to hold employers liability, so most solo sole traders do not need it.
- Hiring an employee, including part-time or casual staff, makes cover compulsory for at least £5 million.
- GOV.UK says fines can be up to £2,500 for each day without cover and £1,000 for not displaying the certificate.
- Genuinely self-employed subcontractors are usually not employees, but the real working relationship decides, not the label; see the subcontractors guide.
- Employers liability is separate from public liability: one covers staff injuries, the other covers third parties.
What Counts as an Employee?
For employers liability purposes, an employee is generally someone working for you under a contract of service or apprenticeship, including part-time and casual workers. Paying a friend to help for a weekend can make you an employer. Self-employed subcontractors are usually outside the rules, but the HSE looks at how the relationship works in practice. Read do subcontractors need their own insurance before relying on someone's self-employed status.
When You Do Not Need It
You do not need employers liability if you work alone, or if you are an unincorporated family business that employs only close relatives (check the exemption detail with HSE). Working alone still leaves you exposed to third-party claims, so look at public liability even if employers liability is irrelevant.
How Much Cover and What the Law Demands
The legal minimum is £5 million, from an authorised insurer, and the policy must be in place from the day your first employee starts. You must display the certificate where employees can read it, or make it available electronically. Many insurers include higher limits as standard. Compare how this differs once you incorporate in sole trader vs limited company insurance.
Penalties for Getting It Wrong
GOV.UK states the Health and Safety Executive can fine you up to £2,500 for every day you are not properly insured and up to £1,000 for failing to display the certificate. Beyond fines, an uninsured employee injury claim becomes a personal liability for a sole trader, which can threaten savings and home.
How It Fits With Your Other Cover
Employers liability covers injury or illness to employees caused by work. Public liability covers injury and damage to everyone else. Professional indemnity covers financial loss from advice. A sole trader who hires help usually needs all that apply; the combined view is in what insurance do I need as a sole trader.
Related reading: public liability vs employers liability, Aisha, a cleaner who pays a helper, sole trader.
Related reading: public liability vs employers liability, Aisha, a cleaner who pays a helper, sole trader.
Real-Life Case Incident & Precedent
Precedent: Employers' Liability (Compulsory Insurance) Act 1969 and the 1998 Regulations: employers must hold at least £5 million of cover from an authorised insurer, and the status of a worker depends on the true working relationship.
The Weekend Labourer
Scenario: Dan, a self-employed landscaper, pays a friend £90 a day to help on weekends. The friend falls from a retaining wall and breaks a wrist, then claims against Dan.
Resolution & Judicial Outcome: Dan had public liability but no employers liability. The friend was working under his direction and paid by him, so Dan faced both a possible HSE fine and an uninsured personal claim. He took out £10 million of employers liability cover immediately afterwards.
Related Case Study Simulation:
Read Analysis
What You Should Do: Step-by-Step Action Plan
1
Decide whether anyone who works for you is an employee, including casual and part-time help.
2
Check the status of any subcontractors using the subcontractors guide.
3
If you employ anyone, arrange at least £5 million of cover before they start.
4
Display the certificate or make it available electronically.
5
Pair it with public liability so staff and third-party risks are both covered.
Critical Mistakes to Avoid
- Assuming a handshake or 'cash in hand' arrangement avoids the rule.
- Treating a worker as self-employed without checking their real status.
- Believing public liability covers employee injuries.
- Forgetting to display the certificate.