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The short answer
Employers' liability insurance is compulsory for UK employers from the day they become one. GOV.UK says the policy must come from an authorised insurer and cover at least £5 million, and an employer can be fined £2,500 for every day it is not properly insured, plus £1,000 for not displaying the certificate or not showing it to inspectors.
Employers' liability (EL) insurance pays for claims by employees who are injured or made ill because of their work. It is one of the few insurances the law makes compulsory for a business, and it starts with the first employee, not when the company grows. Nigerian founders hiring a first member of staff in a shop, kitchen, care agency or office should have it in place before that person's first shift.
The legal requirements
GOV.UK's employers' liability insurance page (updated 16 October 2026) sets out:
| Requirement | What GOV.UK says |
|---|---|
| When it starts | From the day you become an employer |
| Insurer | Must be an authorised insurer |
| Minimum cover | At least £5 million |
| Fine for not being insured | £2,500 for every day you are not properly insured |
| Certificate | Display it where employees can see it (workplace, website or intranet) and show it to inspectors when asked |
| Fine for certificate failures | £1,000 |
The daily fine is what makes this serious. Example only: a company that employs someone for 20 working days before arranging cover is exposed to 20 × £2,500 = £50,000 in fines, before any injury claim is considered.
The exemptions
GOV.UK says you do not need EL insurance if you only employ:
- A family member: close relatives such as a spouse, civil partner, parent, child, grandparent or sibling, including step and half relatives.
- Someone based outside England, Scotland and Wales.
Read both with care. The family exemption applies only where every employee is a close family member: hire one person outside the family and the exemption goes. The GOV.UK wording is short and does not discuss how it applies to a limited company, so confirm with an insurer or the Health and Safety Executive before relying on it for a company. The second exemption covers, for example, a UK company whose only employee works in Lagos; it does not cover a UK-based employee who happens to be Nigerian.
Common set-ups and what they mean
| Set-up | EL needed? |
|---|---|
| Sole director, no employees | GOV.UK's duty applies to employers with employees; with no one employed there is nothing to insure under this rule |
| Catering company with two part-time kitchen staff | Yes, from their first day, at least £5 million |
| Shop staffed only by your spouse and adult son | GOV.UK's family-only exemption may apply; confirm with an insurer for a limited company |
| Family shop plus one Saturday helper who is not related | Yes, the family-only exemption no longer applies |
| UK company whose only employee works in Lagos | GOV.UK exempts employers whose only employee is based outside England, Scotland and Wales |
Part-time, temporary and casual staff are still employees for most purposes, so a business that brings in extra hands for a busy weekend should check the policy covers them before they start.
Checking the insurer and the policy
- Search the Financial Conduct Authority register, or contact the FCA, to confirm the insurer is authorised, as GOV.UK advises.
- If you use a broker, GOV.UK points to the British Insurance Brokers' Association website for a list.
- Check the limit on the certificate is at least £5 million.
- Check the policy covers the work your staff actually do, and update the insurer when that changes, such as adding delivery driving or cooking.
If an employee is hurt
Record what happened, when and who saw it, and tell your insurer promptly in the way the policy requires. Do not agree liability or promise payment yourself before the insurer is involved. The point of EL cover is that a serious claim, which can include lost earnings and long-term care, is met by the insurer rather than by the company's own cash.
How it fits with other cover
EL covers claims from employees. Claims from customers or members of the public, such as a customer who slips in a shop or falls ill after a catering job, are a matter for public liability insurance, a separate policy that landlords, councils and market operators may ask to see. Small-business packages often combine the two. The broader picture for food businesses is in insurance for a Nigerian food shop.
Steps before the first hire
- Decide the start date and the role, so the insurer can price the risk.
- Get quotes for EL with at least £5 million cover from an authorised insurer.
- Make sure cover starts no later than the employee's first day.
- Display the certificate, and keep it where you can show it to an inspector.
- Carry on with registration as an employer and payroll; see setting up PAYE.
If you are hiring a relative, the pay and right to work points are in employing a family member. This is information, not legal or insurance advice.
Where Pryme fits
Premiums are a regular business payment like rent. A Pryme Business Account holds GBP with local details for paying a UK insurer, and verifiable statements generated through VerifyDoc.ai can help when an insurer or landlord asks for proof of payments. See /p/receipts and /p/b-multicurrency.
Questions people ask
Is employers' liability insurance a legal requirement in the UK?
Yes, for employers from the day they become one, with limited exemptions. GOV.UK sets a minimum of £5 million cover.
What is the fine for not having employers' liability insurance?
£2,500 for every day you are not properly insured, according to GOV.UK, plus £1,000 for not displaying or showing the certificate.
Do I need it if I only employ my wife?
GOV.UK lists an exemption where you only employ close family members. Confirm with an insurer whether it applies to your company before relying on it.
Do I need it for a staff member in Nigeria?
GOV.UK exempts employers whose only employee is based outside England, Scotland and Wales. Nigerian rules for that employee are a separate question.
Sources
- GOV.UK: Employers' liability insurance (updated 16 Oct 2026) · accessed Oct 2026
- GOV.UK: Register as an employer · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.