First employee · PI

PI insurance when hiring your first employee

Reviewed by Matthew Bartlett, Director, Apex Insurance Brokers Limited · Published 15 July 2026

Hiring a first employee changes your insurance picture materially. Employers' liability becomes mandatory, PI wording extends, and HR-related exposures appear.

What changes at first hire

Employers' liability (EL) becomes legally required — £5m minimum by law.
PI cover should extend to work done by the employee.
EPL (employment practices liability) becomes worth considering.
Cyber cover may need to reflect access-permission changes.
Additional-insured requirements from clients may need refreshing.

Employers' liability — the basics

EL is legally required for all UK employers except a few narrow exemptions.

Minimum £5m; commercial standard is £10m.

Covers employee injury, illness or death arising from employment.

Also increasingly covers workplace-related mental health claims.

Certificate of insurance must be displayed and provided to HSE if requested.

PI wording extension

Standard UK PI extends to employees acting in the course of their employment — confirm this in the wording.
Named-employee endorsements may be needed for senior technical staff.
The firm remains vicariously liable for employees' acts and omissions.
Fee income used to calculate PI premium should include employee-generated fees.

Employment practices liability (EPL)

Covers claims arising from employment issues: discrimination, unfair dismissal, harassment, wrongful termination.

Not required by law but increasingly standard.

Typical cover £500k-£5m depending on firm size.

Especially worth considering for firms in employment-law-adjacent work (HR, legal, coaching).

Practical steps at first hire

EL policy in place before start date.
PI cover confirmed to extend to employee's work.
Broker discussion on EPL and other extensions.
Client contracts reviewed for insured-parties requirements.
HR policies documented (basis for EPL claim defence).
Cyber/data-access controls reviewed.

Frequently asked

Do I legally need EL from day one of hiring?

Yes — for any employee, EL is required from the first day. Some minor exemptions for family businesses.

Is EL expensive?

Usually not for small firms — often £100-£400 per year for a first employee.

Does PI cover mistakes by employees?

Standard PI extends to employees acting in the course of employment. Confirm the wording.

What if the employee is a contractor?

Different treatment. Contractors need their own PI — and the hiring firm needs their contract to reflect this.

What about first apprentice or intern?

Still an employee — EL applies. Some apprenticeship schemes have specific arrangements — check details.

Should I add EPL immediately?

Not always immediately — but review as staff numbers grow. Under 5 employees: often self-insure. 5+: usually purchased.

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Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. Registered in England and Wales, company number 07014570.