How your staff’s status affects your EL insurance

As an owner or manager, you have a responsibility to provide your employees with a safe working environment. If you fail to do so, it could result in a current or even former employee filing …

As an owner or manager, you have a responsibility to provide your employees with a safe working environment. If you fail to do so, it could result in a current or even former employee filing a claim against you. A successful claim can be costly—not just financially—but also to your organisation’s reputation. To protect yourself and comply with government regulations, you need employers’ liability (EL) insurance, which covers the cost of compensating employees that have been injured or fallen ill at work. Even if you only employ one person, you still need EL cover.

In addition to employees, you may also have volunteers, seasonal employees, contractors or other types of nonstandard staff that work for your organisation. Correctly classifying your employees—especially nonstandard ones—is crucial when estimating the level of EL cover you need.

In general, organisations are required to have at least £5 million of EL insurance, yet depending on your organisation’s particular risks and liabilities, you may choose to increase the amount of cover.

A comprehensive and effective EL policy should provide cover for the following types of employees:

  • All permanent employees
  • Contract, casual and seasonal employees
  • Abroad employees that spend at least 14 days continuously in Great Britain or more than seven continuous days on an offshore installation
  • Labour-only subcontractors

In addition, your policy should provide cover for the following positions even though they are unpaid roles:

  • Temporary staff—including students and people on work placements
  • Volunteers, advisors, referees and marshalls

Does the Law Apply to my Business?

Whilst organisations are usually legally obligated to have EL insurance, there are some organisations that are exempt from the Act. The following types of organisations are exempt:

  • Most public organisations, which include government departments and agencies, local authorities, police authorities and nationalised industries.
  • Health service bodies, which include National Health Service trusts, health authorities, primary care trusts and Scottish health boards.
  • Organisations financed through public funds, which include passenger transport executives and magistrates’ courts committees.
  • Family businesses that employ only family members. If a family business also employs non-family members, then they would be required to have EL insurance.
  • Companies with no employees, such as a sole trader.

Do I Need EL Insurance for all my Employees?

Your organisation is required by law to have EL insurance for all individuals that you employ under a contract of service or apprenticeship. This contract can be spoken, written or implied. Regardless of what type of contract you may have, what is important is the nature of your relationship and the degree of control that you have over the assigned work. If your organisation incorrectly classifies an employee—either intentionally or unintentionally—there could be severe penalties and fines. Not only that, but you could be liable for the full cost of a costly EL claim.

Verifying that you have correctly classified your employee’s status is crucial to defining estimates for an EL policy. If you misclassify an employee, you risk obtaining an EL policy that leaves your organisation vulnerable to substantial employee compensation claims.

To learn more about this type of cover or for further advice, contact A-Plan today.

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