Hiring your first employees: the insurance you must have

Reviewed by Apex Insurance Brokers · Last reviewed 2026-08-06

Making your first hire is a real milestone. You have moved from a founder-and-a-laptop to a company with people who depend on you, and that changes your legal footing overnight. Most of the paperwork that comes with hiring — payroll, a contract, right-to-work checks, pension auto-enrolment — is well signposted. One duty that founders routinely miss is the insurance one, and it is the only one on this list that is genuinely non-negotiable by law: Employers' Liability insurance.

This guide explains exactly what triggers when you hire, what EL does and does not do, the certificate rules that catch people out, and the sensible covers to layer on as your headcount grows. It is written for early-stage, venture-backed teams, but the legal core applies to any UK employer.

Do I legally need insurance when I hire my first employee?

Yes. Under the Employers' Liability (Compulsory Insurance) Act 1969, businesses that employ staff must hold Employers' Liability insurance from an authorised insurer. The requirement is triggered by the employment relationship itself, not by how many people you have or how much you pay them. One employee is enough.

The purpose is straightforward: if someone who works for you is injured or becomes ill because of that work, and you are found to be at fault, EL insurance is what allows a valid claim to be paid. Without it, a claim could fall directly on the company — and, in an early-stage business, on the founders' hard-won runway. The law exists precisely because employees should not be left uncompensated if the company cannot pay.

Trading without EL cover when you are required to hold it can lead to financial penalties. We deliberately don't quote a specific figure here because the rules change and the amount can depend on how long you were uninsured; the practical point is that non-compliance is enforceable and easily avoided. Getting cover is quick and inexpensive relative to the exposure, so there is no good reason to be caught short.

What does Employers' Liability insurance actually cover?

EL responds to claims brought by an employee (or former employee) who alleges they were injured or made ill as a result of their work, where the employer is legally liable. It covers the compensation awarded plus the legal costs of defending the claim. Typical scenarios include:

• A slip, trip or fall in the office or workspace.
• An injury caused by faulty equipment or an unsafe working practice.
• A repetitive strain or musculoskeletal condition linked to how work is set up.
• An illness — sometimes surfacing years later — attributed to workplace exposure.

Policies are commonly written with a limit of indemnity of £10m, which is a widely used market standard rather than a figure you personally negotiate. It is worth understanding what EL is not: it does not cover claims from customers or members of the public (that is Public Liability), and it does not cover claims that your professional advice or service caused a client a financial loss (that is Professional Indemnity). It is specifically about your duty of care to the people who work for you.

A useful nuance for startups: "employee" for EL purposes can be broader than the person on your PAYE payroll. Depending on how you engage people, some contractors, temporary staff, apprentices and volunteers can fall within scope because the day-to-day working relationship looks like employment. If your team is a mix of permanent hires and contractors, that is exactly the kind of detail worth checking rather than assuming.

Larger or more complex risk? Speak directly to a director — call 0117 325 0027 or email info@apexinsurancebrokers.co.uk.

Are there any exceptions? Do single-director companies need EL?

There are exceptions, but they are narrow, and founders often over-apply them. Broadly, a company that only employs people who are close family members may fall outside the requirement, and a company with a single director where that director is the only employee — and owns a large enough share of the business — can also be exempt in some cases. This is why many one-person startups genuinely do not need EL while they are a solo founder.

The moment that changes is your first hire. As soon as you bring on someone who is not covered by a genuine exemption — almost any employee outside a narrow family-only setup — the requirement applies. The exceptions are worth knowing about, but they are the wrong thing to lean on if you are actively growing a team. If you are unsure whether your specific structure is exempt, treat that as a question to resolve with a specialist rather than a gap to guess at, because getting it wrong is the expensive outcome.

The certificate: display and keeping duties founders forget

Holding EL cover is only half the obligation. When you take out a policy, the insurer issues an Employers' Liability certificate showing your cover, and you have a duty to make it available to your employees. In practice, having it accessible to staff — a copy on a shared drive or intranet is widely accepted for distributed and remote teams — satisfies the display requirement.

There is also a keeping duty. Because work-related illness can take years to surface, claims can be made long after the exposure happened. For that reason employers are expected to retain their EL certificates going back over time rather than binning last year's when the renewal lands. It is a small admin habit that protects you: keep a simple, dated archive of every EL certificate you have ever held. When you eventually run a diligence process for a funding round, having that history tidy is one less thing a lawyer can flag.

What other cover should a growing team add?

EL is the legal floor. As you hire beyond the first person, three further covers become genuinely worth considering — not because the law demands them, but because your risk profile changes as more people, contracts and clients enter the picture.

Public Liability (PL). If members of the public, clients or visitors interact with your business — someone visits your office, you attend a client site, you run an event — PL covers claims for injury or property damage you cause them. It is not legally mandatory, but many co-working spaces, landlords and client contracts require you to hold it, so it often becomes a practical necessity early.

Employment Practices Liability (EPL). Once you employ people, you also inherit the risk of employment disputes — allegations of unfair dismissal, discrimination, harassment or grievance handling. EPL (sometimes bundled within a management liability or D&O package) covers the cost of defending these claims and any awards. This is a different risk from EL: EL is about physical injury and illness, EPL is about how you manage the employment relationship. As your team grows past a handful of people, the odds of an employment dispute rise, and the defence costs alone can be significant for a young company.

Directors' & Officers' (D&O). D&O protects the personal liability of your directors and officers for decisions they make running the company. It is not a legal requirement — but it is commonly required by investors, and D&O cover is frequently written into term sheets, typically from Series A onwards. If you are raising, expect it to come up. We cover this in depth in our guide to Directors' & Officers' insurance explained.

You don't need all of this on day one. The sensible sequencing for most startups is: EL the moment you hire, PL when you start dealing with the public or a contract demands it, then EPL and D&O as the team scales and you move toward institutional funding. For a stage-by-stage view, see our startup insurance by funding stage guide.

What drives the cost of Employers' Liability cover?

We won't quote prices — anyone who gives you a firm number before understanding your business is guessing — but it helps to know the factors an insurer weighs when pricing EL for a startup:

• The nature of the work. A software team at desks presents a very different injury risk from a business with lab work, warehousing, field engineers or anything physical.
• Headcount and payroll. More employees and a larger wage roll generally mean more exposure, and payroll is a common rating factor.
• Use of contractors and temporary staff. How you engage non-permanent people affects who falls within scope.
• Your claims history and risk controls. Sensible health-and-safety practices and a clean record work in your favour.

For a typical early-stage, office-or-remote software team, EL is one of the more affordable covers you will buy — which makes the legal requirement all the easier to meet. Our related reading on what drives startup insurance costs breaks the pricing factors down further.

A simple checklist before your new hire starts

• Confirm whether an exemption genuinely applies — if you are hiring beyond a family-only or solo-director setup, assume EL is required.
• Put EL cover in place before the employee's start date, not after.
• Check that contractors, part-timers, apprentices and volunteers are correctly accounted for in the policy.
• Make your EL certificate accessible to staff, and start a dated archive of every certificate you hold.
• Diary a review of PL, EPL and D&O as your team grows and as you approach a funding round.

Hiring should feel like progress, not a compliance scramble. Getting EL right is quick, and it is the kind of thing that is far cheaper to do properly on day one than to fix under a claim. If you would rather talk it through than fill in a form, speak to an Apex specialist and we will make sure you are covered for exactly the team you have — and ready for the team you are about to build.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This article is general information, not advice on a specific policy or a recommendation to buy any product.