A business guide to employment practices liability (EPL) insurance

One major hallmark of a successful business is its ability to manage risk. Most firms keep a close eye on potential problems with customers, suppliers, vehicles, and property. However, not all companies are adequately prepared for possible employment disputes. This is why taking out adequate employment practices liability (EPL) insurance is so important.

27.01.26

By Alan Boswell Group

It’s there to help safeguard your business if an employee, former employee, or even a potential employee, alleges that you’ve breached their employment rights.

What is employment practices liability insurance?

Entity employment practices liability insurance (EPL) is intended to protect your business from the financial and legal impact of claims arising from a wide range of employment-related disputes.

EPL is available as a standalone policy, but it is typically an optional extension to a Directors’ & Officers’ or management liability insurance policy.

The core risk: the cost imbalance against employers

In the UK, employment tribunal claims do not require an employee to pay a tribunal fee. This has been the case since the Supreme Court's decision in R (UNISON) v Lord Chancellor (2017), which abolished the fee regime in place at the time.

While this helps employees with genuine grievances access the tribunal system, it creates a cost imbalance that’s weighted against employers. This is because businesses frequently face immediate, unavoidable costs when allegations are made against them. These include:

seeking legal advice
preparing witness evidence and documentation
paying solicitors or counsel
management time and disruption

These costs can quickly mount up and often outweigh any settlement awarded. While tribunals can make costs orders to recoup costs from the opposing party, the general position is that each party bears their own costs. Costs orders are very rare and are typically awarded where a party has acted vexatiously, abusively, disruptively or unreasonably in bringing (or conducting) the proceedings.

What does EPL insurance cover?

EPL insurance supports your business with the possible legal and financial impact of defending employment-related allegations.

A suitable EPL policy is designed to help you defend against claims, including:

Unfair or constructive dismissal

Discrimination (on the basis of age, sex, race, religion or belief, disability, etc.)

Harassment and sexual harassment

Wrongful discipline

Other alleged failures in employment practices

Without EPL insurance, you may have to cover defence costs (such as fees for solicitors, barristers, and experts), plus any tribunal award or agreed settlement. You’ll also need to pay for practical support in the early stages of a case, helping you to reduce the chance of escalation. Depending on the claim and how it progresses, a business’s to defend a claim can quickly escalate.

Why your business needs this cover

Reasons your business needs EPL cover include rising tribunal claims, uncapped awards, modern risks (such as remote working), and reputation management.

Rising tribunal claims

In the tribunal statistics for July–September 2025 (Q2 2025/26), the Ministry of Justice reported that single Employment Tribunal receipts went up by 33% year-on-year. In addition, case disposals decreased by 10%. The overall open caseload was also up 33% on the previous year.

Tribunal workload matters because it affects how often disputes become formal claims, and how long cases can take to resolve. A higher volume of claims in the system will usually mean increased management time, delay, and pressure to settle simply to resolve the dispute quickly.

Uncapped awards (for certain claim types)

Employers may assume that employment awards are “limited” - sometimes they are, but not always.

Unfair dismissal compensation is capped, and the cap is increased periodically. For unfair dismissals with an effective date of termination on or after 6 April 2025, the maximum compensation that can be awarded is £118,223 (or 52 weeks’ pay if lower).

By contrast, in discrimination cases, there is no limit on tribunal compensation.

Given this, EPL cover could not only help protect your balance sheet but, in some cases, ensure your company survives.

Flexible working, remote working, restructuring pressure

Since the COVID-19 pandemic, flexible working and remote / hybrid arrangements have become widespread. While these can be of great benefit to both employers and employees, they can also lead to disputes over expectations, working hours, and performance management.

The legal framework is also evolving. For example, changes introduced in April 2024 affected the statutory flexible working process (including making requests more accessible for employees and shortening the period employers have to respond).

The economic climate can also lead to reorganisations and redundancies, increasing the risk of being taken to tribunal, even for well-run businesses.

Reputation management

Employment tribunal hearings are usually held in public, while tribunal decisions are published online.

Even if you successfully defend a claim, the process can expose sensitive workplace issues. Depending on the policy, EPL can help support earlier resolution, provide PR expertise, and private settlements, helping to maintain your business’s reputation.

Legal support and prevention

Many EPL policies (including certain policies arranged within Alan Boswell Group’s management liability insurance) can provide you with access to specialist legal advice, support, and HR tools. This could include:

Guidance on handling grievances, disciplinaries, and sensitive conversations

Sanity-checking next steps before a situation develops into a claim

Help to reduce the risk of procedural mistakes that make defending a claim harder later on

You can learn how one of these services helped Alan Boswell Group client, Heat Norfolk, in this case study.

Early use of helplines and support services can help demonstrate that you acted responsibly, which can strengthen your position if a claim is later made against you.

Is EPL the same as directors’ and officers’ (D&O) insurance?

They’re related, but cover different liabilities:

Directors’ & officers’ insurance protects individual directors and officers against claims relating to management decisions (for example, allegations from shareholders, regulators, creditors, and others).

EPL insurance protects the company from allegations arising from employment disputes.

In practice, these covers are often packaged together under a management liability policy. This offers comprehensive protection for a company and the people running it.

How EPL works alongside legal expenses insurance

This is where many businesses get caught out.

Legal expenses insurance is typically designed to cover legal costs for a range of disputes, and commercial legal expenses cover can include employment disputes. Some legal expenses policies include add-ons (for example, limited awards cover), but many focus primarily on legal costs, so it’s important to check the wording carefully.

EPL, however, is specifically built around the employment tribunal risk and (depending on wording) can respond not only to defence costs, but also to awards/settlements and the wider claim-handling support that comes with a specialist employment claims framework.

Need help with your insurance?

If you employ people, you have employment risk. Even if you do everything “right”, disputes still happen, and the cost of defending them can be significant.

EPL insurance helps you respond with confidence: funding defence costs, helping to manage settlement risk, and giving you access to expert support to prevent problems escalating.

Speak to us: 01603 218000

A business guide to employment practices liability (EPL) insurance

In this article

In this article

What is employment practices liability insurance?

The core risk: the cost imbalance against employers

What does EPL insurance cover?