Do I Need Employers’ Liability Insurance as a Tradesman?

Who counts as an employee for employers’ liability?

Anyone who works under your control, using your materials, to your instructions. That covers part-timers, casual help, apprentices and most labour-only subcontractors.

The three tests that settle it

Courts look at control, personal service and mutuality of obligation. Do you tell them how and when to do the work, must they turn up themselves, and are you both expected to keep the arrangement going?

Answer yes to those and the label on the invoice stops mattering. The reality of the arrangement is what a judge weighs up.

Insurers apply the same reasoning at claim stage. If in doubt, assume the person counts and get them named on the policy rather than gambling on the outcome.

Apprentices, casual help and family labour

Apprentices are employees from day one, whatever the training provider calls the placement. So is a lad you pay cash to help you strip a roof for a fortnight.

Family members count as well unless a narrow exemption applies. A carpenter whose son works weekends still has an employer duty in most set-ups.

Agency and hired-in workers

Agency staff are usually the agency’s employees, and the agency holds the cover. That changes when you supervise them directly and set the method.

Confirm in writing which side carries the employers’ liability before the worker starts. Two parties assuming the other one has it is a common gap.

What separates a labour-only subcontractor from a bona fide one?

A labour-only subcontractor supplies hands. A bona fide subcontractor supplies a business, complete with its own tools, its own method and its own insurance.

What labour-only actually means

Labour-only means you supply the materials, the plant and the instructions. The subcontractor supplies time and skill, and works the way you tell him to.

Insurers treat those workers as employees, so they belong on your schedule. A painter and decorator taking on two lads for a big repaint has just become an employer for insurance purposes.

The bona fide checklist

A genuine subcontractor prices the job, decides how to do it, brings his own kit and carries his own public liability. He can also send someone else in his place.

Being registered for the Construction Industry Scheme proves nothing on its own. CIS deals with tax deductions, not employment status.

Take a copy of the certificate before the first day, not after the accident. An expired policy leaves the exposure with you.

Does a sole trader working alone need it?

No. With no employees of any kind, the 1969 Act does not apply to you, and no insurer will sell you a policy that could ever pay out.

Genuinely on your own

One person, one van, no help. That is the profile where public liability for sole traders is the cover that matters and employers’ liability is dead weight.

A handyman who never subcontracts anything can quote for domestic work all year without an employers’ liability certificate.

The day you bring a mate in

Everything changes the first afternoon someone helps you lift a joist for £80 cash. For that day he is working under your direction, and the duty applies.

Insurers can add employers’ liability mid-term rather than making you wait for renewal. The cost of a short adjustment is far below the cost of one uninsured day.

Seasonal help counts in exactly the same way. A summer of extra hands on landscaping or fencing work puts you inside the requirement for those weeks.

Which businesses are actually exempt?

Two exemptions exist and both are narrow: family businesses where every employee is a close relative, and a company whose only employee owns at least half the share capital.

The family business exemption

The exemption covers unincorporated businesses where all employees are closely related to the employer. HSE guidance lists the qualifying relationships, from spouse and civil partner through to step-children.

It falls away the moment you incorporate. A limited company employing only the owner’s brother still needs the policy.

Employ one person outside the family and the exemption stops applying to everybody, not just to the new hire. It is all or nothing.

The 50% shareholder exemption

A limited company that employs one person, where that person owns 50% or more of the issued share capital, is exempt. One extra hire ends it.

Two directors are two employees, so the exemption does not apply to a 50-50 pair. A director without a contract of employment may not count as an employee at all.

Read the Employers’ Liability (Compulsory Insurance) Act 1969 if your share structure is unusual, and ask your broker to confirm your position in writing.

What happens if you employ someone with no cover in place?

You face a penalty of up to £2,500 for every day you were uninsured, and you personally fund any injury claim your employee brings.

£2,500 for every uninsured day

The penalty runs per day, not per offence. Government guidance on employers’ liability sets it out plainly, and no accident needs to have happened for it to apply.

A further penalty of up to £1,000 applies for failing to display or produce the certificate. The two are separate, so both can land at once.

The compensation you fund yourself

Without a policy there is no insurer to pay the damages, the claimant costs or your defence. A serious fall on a roofing job can run to a lifetime care claim.

A sole trader has no corporate shield either, so the house and the savings sit behind that claim. One uninsured injury has closed plenty of trade businesses.

Buying cover after the accident changes nothing, because insurance cannot be backdated. The policy you take out tomorrow answers for tomorrow only.

Who asks to see your certificate besides HSE?

Main contractors, local authorities, housing associations and pre-qualification schemes all ask before you set foot on site. They ask more often than any inspector does.

Main contractors and pre-qualification

Pre-qualification packs usually want the certificate, the schedule and the limits in one bundle. A roofing contractor tendering for social housing work will be asked for all three.

Keep a current copy on your phone. Gate checks are common and a missing certificate can cost you the morning.

Some clients also want the schedule showing the wage roll and activities you declared. Send both together and the query usually stops there.

Sole traders asked for a certificate they do not need

Plenty of clients ask one-man bands for employers’ liability out of habit. Explain that you have no employees and offer your public liability certificate instead, which is the cover that protects them.

Some frameworks still insist as a blanket condition. If the contract is worth it, adding the section is usually cheaper than arguing about it.

When should the policy start, and what should you tell your insurer?

Cover has to be live before the first shift. Insurance cannot be backdated, so a policy bought the morning after an accident will never pick that accident up.

Before the first shift, not the first accident

Set the inception date to the day your first worker starts, not the day the wages first go out. The gap between those two dates is uninsured trading.

Money.co.uk publishes a worked quote of £6.18 a month for a one-employee business on £50,000 turnover with £1 million of public liability. Full package pricing sits in our guide to tradesman insurance costs.

The changes worth phoning in

Tell your insurer when headcount changes, when wage roll jumps and when you take on work you have never priced before. Each one alters the risk you are rated on.

Renewal is the moment to check those numbers rather than roll them over. A wage roll set for a two-man outfit rarely fits the same business after a busy year.

The same goes for adding new activities to a trade policy. Undeclared work at height is the classic thing that turns a valid claim into an argument.