Employer's Liability vs Public Liability Insurance: What's the Difference?
Employer's liability and public liability are two different types of business insurance. One is a legal requirement; the other is strongly recommended. Here's what each covers.
Employer's liability (EL) and public liability (PL) insurance are both important for businesses, but they cover different risks. EL covers claims from employees; PL covers claims from third parties (customers, visitors, members of the public). Understanding the difference ensures you are legally compliant and adequately protected.
Employer's liability insurance vs Public liability insurance: The Definitions
Employer's liability insurance covers businesses against claims from employees who suffer work-related injury or illness due to their employer's negligence. Under the Employers' Liability (Compulsory Insurance) Act 1969, UK businesses with one or more employees must hold EL insurance with a minimum £5 million cover.
Formula
Legal minimum: £5 million per claim. Most policies provide £10 million. Penalty for not holding EL: up to £2,500 per day.
Example
A warehouse employee slips on a wet floor and breaks their wrist. They sue the employer for failing to maintain safe conditions. The employer's EL policy covers the £35,000 compensation settlement and legal costs.
Public liability insurance covers businesses against claims from third parties — customers, visitors, suppliers, or members of the public — who are injured or suffer property damage as a result of your business activities. PL is not a legal requirement for most businesses but is essential for those that interact with the public.
Formula
Typical cover: £1 million to £5 million, or £10 million for larger businesses or those working on public or council contracts. Not legally mandated but often required by clients and contracts.
Example
A plumber accidentally damages a customer's water main while working in their kitchen, causing £12,000 of flooding damage. The plumber's PL insurance covers the repair costs and any associated compensation claim.
Key Differences
- 1EL is a legal requirement in the UK; PL is not legally mandated (except in specific regulated activities such as horse riding establishments)
- 2EL covers claims from your employees; PL covers claims from third parties and the general public
- 3EL minimum cover is £5 million by law (most policies provide £10 million); PL cover amounts vary by risk profile and contract requirements
- 4Failure to hold EL can result in fines of up to £2,500 per day; failure to hold PL has no legal penalty but leaves significant financial exposure
- 5EL certificates must be displayed or accessible to employees; PL certificates have no display requirement
When to Use Employer's liability insurance vs Public liability insurance
If you have any employees, EL is compulsory — get it before hiring. If your business interacts with clients, customers, or the public, PL is essential (and often contractually required). Most SMEs need both. Sole traders with no employees do not legally require EL but should strongly consider PL if they work on client sites or in public spaces.
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Common Mistakes to Avoid
Assuming EL is only needed for full-time permanent employees — EL is required for part-time, temporary, seasonal, and apprenticeship staff, and in some cases for labour-only subcontractors
Letting EL insurance lapse (e.g. annual renewal missed) and continuing to employ staff — this creates daily fines AND unprotected exposure to claims
Relying on PL to cover employee claims — a claim from an employee must be routed through EL, not PL. The two policies cover different claimants.
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Frequently Asked Questions
Does a sole trader need employer's liability insurance?↓
A sole trader with no employees is not legally required to hold EL insurance. However, if a sole trader hires a sub-contractor and directs their work (treating them as an employee in practice), EL may be required. If you are unsure whether your sub-contractors require EL cover, consult your insurer.
What is the minimum employer's liability cover required by law?↓
UK law requires a minimum of £5 million employer's liability cover. In practice, most EL policies provide £10 million as standard, as individual claims can be substantial, especially for serious injuries causing long-term disability or loss of earnings.
Does public liability insurance cover professional mistakes?↓
No. PL covers bodily injury and property damage to third parties. Professional mistakes and errors are covered by professional indemnity (PI) insurance. For example, if an accountant gives incorrect tax advice resulting in a client's financial loss, that is a PI claim — not a PL claim. Most service businesses need both PL and PI.