Employers’ liability exemptions are specific. They should not be extended by analogy or reduced to broad rules such as “family businesses are exempt” or “contractors provide their own insurance.”
The correct result depends on the employer’s legal structure, the people performing work, the real employment relationship and the jurisdiction.
Official Great Britain exemptions
HSE’s Great Britain guidance identifies exempt categories that include:
- most specified public organisations;
- specified health-service bodies;
- certain other publicly funded organisations;
- qualifying family businesses;
- a company with only one employee where that employee owns at least 50% of the issued share capital. (HSE)
The complete statutory list should be checked in section 3 of the 1969 Act and Schedule 2 to the 1998 Regulations. A general guide should not attempt to decide whether an unusual public or quasi-public body falls within those provisions.
Family businesses
The Great Britain family-business exemption can apply where all employees are closely related to the employer within the relationships recognised by the official rules.
The exemption does not apply to a family business incorporated as a limited company. (HSE)
This produces two important distinctions:
| Structure | Possible position |
|---|---|
| Unincorporated family business employing only qualifying close relatives | Family-business exemption may apply. |
| Limited company employing family members | The family-business exemption does not apply merely because everyone is related. |
| Limited company with one employee who owns at least 50% | The separate sole-employee company exemption may apply. |
| Family business employing any non-qualifying person | The family-business exemption may no longer fit. |
A family relationship does not remove the need to check workplace health and safety duties or contractual insurance requirements.
Sole traders
A sole trader working alone does not employ another person and will not ordinarily need compulsory employers’ liability insurance for themselves.
When a sole trader takes on staff, a helper or a person described as self-employed, the relationship must be examined. Sole-trader status does not exempt the business from cover for people it actually employs.
Limited companies and directors
A limited company is not automatically exempt because it is small, family-owned or operated by directors.
The relevant company exemption inserted by the 2004 Regulations requires:
- only one employee; and
- that employee to own at least 50% of the issued share capital. (Legislation.gov.uk)
The exemption may therefore cease to fit when the company takes on another employee.
A director who does not satisfy that precise arrangement should not assume that holding office or receiving dividends removes the insurance requirement.
Contractors
A genuine independent contractor may fall outside the employment relationship for which compulsory employers’ liability cover is required.
HSE says the actual relationship matters more than the chosen label. Factors can include control, equipment, integration, personal service, substitution and whether the person is genuinely operating a business for their own benefit.
Borderline examples include:
- a “self-employed” individual working only for one business;
- a labour-only subcontractor using the principal’s equipment;
- a consultant required to work fixed hours under close supervision;
- a contractor who has no genuine right to send a substitute;
- agency or temporary staff whose insurance responsibilities are divided contractually.
The existence of a clause requiring the contractor to maintain insurance does not conclusively determine their status under compulsory-insurance law.
Volunteers and unpaid placements
HSE’s guide says that, in some cases, no additional employers’ liability insurance is needed for volunteers, unpaid students, people on certain training programmes or school work-experience students.
It also states that insurers will usually include these groups within an existing employers’ liability policy and recommends contacting the insurer where placements are lengthy, unusual or undertaken without existing cover.
The safe editorial conclusion is not “volunteers are exempt.” It is:
The statutory and policy position depends on the arrangement. Check the activity, supervision, duration, existing policy and official guidance before the placement begins.
Domestic help
HSE describes domestic help as a difficult area.
Its guidance says employers will probably not need cover for cleaners or gardeners who work for more than one person and are operating independently. It also says a person who works only for one household may create a requirement for cover. (HSE)
The same factual questions about control, equipment, personal service and independence remain relevant.
Employees working abroad
Under the Great Britain framework, an employer must have employers’ liability insurance where employees are normally based in England, Scotland or Wales, including relevant offshore arrangements.
Employees normally based abroad generally fall outside the Great Britain requirement, but HSE states that cover becomes necessary where they spend more than:
- 14 continuous days in Great Britain; or
- seven days on an offshore installation.
The employer should also check the law of the country where the person is based or working. (HSE)
This is not a general ruling on policy territorial cover. The policy wording and foreign legal requirements must still be examined.
Offshore work
The Great Britain regime extends, with modifications, to specified employment on offshore installations and associated structures.
HSE also provides a special certificate-access arrangement: a certificate need not be displayed on every offshore installation, but an employee requesting it must receive access as soon as possible and within ten working days. (HSE)
Offshore businesses should use the applicable specialist regulations and advice rather than rely solely on this general guide.
Northern Ireland
Northern Ireland has a separate compulsory-insurance framework.
HSENI says employers must have compulsory cover when they employ staff, with a minimum of £5 million. Its official guidance recognises exemptions for an unincorporated business employing only close family and a limited company with one employee who owns at least 50% of the issued share capital. (HSE Northern Ireland)
Businesses involving both Great Britain and Northern Ireland should not assume that satisfying one administrative requirement conclusively resolves every local requirement.
Questions to frame a professional discussion
A business can prepare by recording:
- The legal entity employing each person.
- Where each person is normally based.
- Whether the relationship is written, spoken or implied.
- Who controls working time, place and methods.
- Who supplies equipment and materials.
- Whether personal performance is required.
- Whether a genuine substitute can be used.
- Whether the person works for other customers.
- Whether the business is incorporated.
- The number of employees and share ownership.
- Whether every employee in a family business falls within the official relationship list.
- Whether volunteers or placements are already covered.
- Whether the customer contract imposes additional insurance obligations.
- Which activities and territories appear in the policy.
Read Is Employers’ Liability Insurance Mandatory? and return to the main Employers’ Liability Insurance UK guide.
About this PIUK guide
PIUK is an educational publication. It does not sell, arrange or advise on insurance. It cannot determine whether a particular business is legally compliant, and it does not interpret a reader’s policy, employment status, contract or claim. This guide is not a substitute for current official guidance, legal advice, insurance advice or support from an appropriately authorised insurer or broker. Check the current official position whenever your circumstances are uncertain.