Do I Need Employers’ Liability Insurance for One Part-Time Employee?

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Introduction

If you’ve just taken on your first member of staff — even someone working a few hours a week — you might be wondering whether employers’ liability insurance applies to you. It’s one of the most common questions small business owners ask, and it’s completely understandable. Surely a law aimed at big employers doesn’t cover someone doing ten hours a week in your shop?

In almost all cases, it does. Employers’ liability insurance is a legal requirement the moment you take on staff, regardless of how many hours they work or whether there’s a formal contract.

There are exemptions, but they’re narrow and widely misunderstood — including one that’s frequently reported backwards, in a way that could leave a limited company facing a fine of up to £2,500 a day. This article explains what the law says, who counts as an employee, which exemptions genuinely exist, and where the grey areas are.

The Legal Position

The Employers’ Liability (Compulsory Insurance) Act 1969

The requirement comes from the Employers’ Liability (Compulsory Insurance) Act 1969, in force for over five decades. If you employ one or more people in the UK, you must hold employers’ liability insurance unless a specific statutory exemption applies.

There is no minimum-hours threshold. The law doesn’t distinguish between full-time, part-time, casual or seasonal workers. One person working a couple of hours a week triggers the obligation.

The minimum cover required by law is £5 million, though most insurers now offer £10 million as standard. The price difference is usually negligible, so £10 million is the sensible default.

One thing to check that most guides omit: your policy must be with an insurer authorised by the Prudential Regulation Authority or the Financial Conduct Authority. A policy from an unauthorised insurer doesn’t satisfy the legal requirement. You can verify an insurer on the Financial Services Register.

Who Enforces It?

The Health and Safety Executive. Inspectors can visit your premises and ask to see your current certificate. If you can’t produce one, or have no policy, the fine can be up to £2,500 for every day you operate without cover. That accumulates — a fortnight of non-compliance is potentially £35,000.

You must also display your certificate, physically or digitally, where employees can access it. Failing to display it, or to produce it to an inspector, carries a separate fine of up to £1,000 for each offence.

Who Counts as an Employee?

The test is whether someone works under a contract of service or apprenticeship — written, oral, or implied by the nature of the relationship. What you call them, and their tax status, doesn’t decide it.

Part-Time and Casual Workers

They count. Two days a week or two hours a week, if you direct their work, provide their equipment and pay them for their time, they’re almost certainly your employee for this purpose. Hours are irrelevant.

Casual workers brought in for busy periods also count, even with no guaranteed minimum hours, whenever they’re working for you.

Zero-Hours Contract Workers

A zero-hours contract doesn’t remove the obligation. If someone turns up to do work for you and you control how it’s carried out, you need cover.

Volunteers and Work Experience

Don’t assume unpaid means outside the requirement. The test is whether a contract of service exists, and it can be implied rather than written. Volunteers with an implied contract of employment, and work experience placements, may well need to be covered.

Even where the obligation is genuinely unclear, most insurers and charity advisers recommend cover anyway — the line between a volunteer and a worker blurs easily, and if someone is injured helping you, you want protection regardless of their formal status.

The Exemptions That Actually Exist

This is where a lot of published guidance goes wrong, so it’s worth being precise.

Family Businesses — and the Mistake to Avoid

If you are a sole trader or partnership and all your employees are close family members, you are generally exempt. HSE lists close family as: husband, wife, civil partner, father, mother, grandfather, grandmother, stepfather, stepmother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother and half-sister.

But that exemption does not apply if your business is incorporated as a limited company. A husband-and-wife limited company needs employers’ liability insurance, even though both are family.

This is frequently stated the wrong way round, including in otherwise sensible guidance, which claims the exemption applies because you’re a limited company. It’s the reverse — incorporating is what loses you the exemption. If you’re a limited company employing your spouse and you’ve relied on that, you may be uninsured and accruing a daily penalty.

The exemption is also all-or-nothing: employ one person outside that family list and you need cover for everyone, family members included.

Sole Directors of Limited Companies

If you’re the only employee of your limited company and you own 50% or more of the issued share capital, you’re generally exempt. This catches a lot of one-person contractors and consultants who assume they need cover and don’t.

Note the limits carefully. If your spouse works in the business with no shares, or with under 50%, that exemption doesn’t cover them — and this is exactly the situation where one partner runs a company full-time and another helps part-time. Cover is required there.

Other Exemptions

• Most public bodies, government departments and certain health service organisations
• Businesses whose workers are based exclusively overseas and never work in the UK
• Businesses where you employ nobody but yourself

These are narrow. If you’re in any doubt, check the current HSE and GOV.UK guidance, or take advice — the cost of a policy is far lower than the cost of being wrong.

The Grey Areas: Subcontractors and Self-Employed Workers

Subcontractors

If someone is genuinely running their own business — setting their own hours, using their own equipment, invoicing you, working for other clients — employers’ liability generally doesn’t apply to them. They should hold their own public liability cover, and their own employers’ liability if they have staff.

But if someone works exclusively for you, follows your instructions, uses your tools and premises and has no real independence in how the work is done, they may be your employee in practice regardless of what the contract says. HSE’s test is whether a contract of service exists — verbal or written — not what label the arrangement carries.

This is an employment status question. It’s related to, but not the same as, IR35, which is a tax rule about services provided through an intermediary company. You can be outside IR35 and still be someone’s employee for insurance purposes, or vice versa. Don’t assume one answer settles the other.

The safe rule: if you’re genuinely unsure whether someone counts as an employee, get cover. A policy costs vastly less than a £2,500-per-day fine, and far less than an uninsured personal injury claim.

Labour-Only Subcontractors in Construction

Workers who provide only their labour, while you supply materials and equipment, are typically treated as employees for insurance purposes. Many construction EL policies include them automatically — check your policy wording rather than assuming.

Why So Many Small Employers Get This Wrong

Plenty of small UK businesses employ staff without cover in place, and it’s usually not recklessness — it’s genuinely not knowing the law applies.

The common misconceptions:

• “They’re only part-time, so it doesn’t apply.” It does. There’s no hours threshold.
• “I’m paying them cash-in-hand, so there’s no record.” Irrelevant to the legal obligation, and operating off the books creates separate problems with HMRC.
• “They’re self-employed.” Check the substance of the arrangement, not the label.
• “We’re a family business.” Only exempt if you’re unincorporated and every employee is close family.
• “We’re a limited company, so the family exemption covers us.” The opposite is true.
• “I’ve been running for years and never been checked.” HSE does inspect, and an employee making a claim exposes any gap immediately.

What Employers’ Liability Insurance Actually Covers

It covers your legal liability if an employee is injured or becomes ill because of their work for you:

• Injuries at your workplace or while carrying out work-related tasks elsewhere
• Illnesses developing over time from working conditions — repetitive strain, exposure to harmful substances
• Legal defence costs if a claim is made
• Compensation awarded by a court

It does not cover injuries to members of the public — that’s public liability — or damage to your own business property. Many small business packages bundle employers’ liability, public liability and contents cover together, which is worth considering if you’re arranging cover for the first time.

How to Get Covered

• A specialist broker, particularly if your trade carries higher risk — construction, care work, food handling
• Comparison sites tailored to business insurance
• Direct from an insurer, many of which offer small business packages online
• Trade associations, some of which run group schemes for members

Premiums depend on your trade, employee numbers and total payroll, so a meaningful price guide isn’t possible — the range across industries is far too wide. Get two or three quotes, read the policy wording, check the level of cover, and confirm the insurer is authorised.

FAQ

Do I need employers’ liability insurance for someone working a few hours a week?

Yes. There’s no minimum-hours threshold under the 1969 Act. A single part-time worker triggers the obligation unless a specific exemption applies.

Am I exempt because I employ a family member?

Only if your business is unincorporated — a sole trader or partnership — and every employee is a close family member on HSE’s list. If you’re a limited company, the family exemption does not apply, even for a husband-and-wife company. Guidance stating the opposite is wrong, and relying on it could leave you uninsured.

I’m the only director and employee of my limited company. Do I need it?

Generally no, provided you own 50% or more of the issued share capital and have no other employees. If someone else works in the business — including a spouse with no shares or a minority holding — that exemption no longer covers the arrangement.

What happens if I don’t have cover?

Up to £2,500 for every day you operate uninsured. Beyond the fine, if an employee is injured and you have no policy, you’d be personally liable for any compensation awarded.

Are subcontractors covered by my policy?

Usually not, if they’re genuinely self-employed and running their own business. But if they work under your direction and control — particularly in construction — they may be treated as employees for insurance purposes. Check your policy wording and ask your insurer.

Do volunteers or work experience placements need covering?

Possibly. The test is whether a contract of service exists, which can be implied rather than written, and unpaid status doesn’t automatically place someone outside it. Take advice, and consider covering them regardless.

Conclusion

If you employ one part-time member of staff — even someone doing a handful of hours a week — you are almost certainly legally required to hold employers’ liability insurance. It isn’t a technicality that applies only to larger businesses.

The exemptions are real but narrow, and two are widely misreported. Unincorporated family businesses employing only close relatives are exempt; limited companies are not, even if every employee is family. And a sole director owning 50% or more of their company’s shares, with no other employees, generally doesn’t need cover.

If none of those describe you, get covered before your new employee starts work. If you’re unsure whether someone counts as an employee, apply the same rule — the cost of a policy is the price of running a compliant business, and it protects both you and the person who’s chosen to work for you.

For authoritative guidance, refer to the HSE and GOV.UK pages on employers’ liability insurance, both free and kept current.

This article is general information about employers’ liability insurance requirements, not legal or insurance advice, and we are not regulated advisers. Whether you are legally required to hold cover, and whether an exemption applies to your business, depends on your specific circumstances and structure — check current HSE and GOV.UK guidance and take advice from a regulated insurance broker, accountant or employment solicitor before relying on any exemption. Legislation and guidance change; confirm the current position before acting.