EL insurance

How employee status affects employers’ liability cover

As an owner or manager, you have a clear obligation and 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.

However, 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. To help you avoid a costly employee misclassification mistake, review the following guidance.

What is EL Insurance?

Under the Employers’ Liability (Compulsory Insurance) Act (the Act), all organisations, with few exceptions, are legally required to have EL insurance if they employ full- or part-time employees.

The HSE enforces the Act and its inspectors can verify whether your organisation has the appropriate cover. During their inspections, they could ask to see your organisation’s certificate of insurance along with other insurance details. If you refuse or are unable to provide these documents, you could be fined up to £1,000. If you do not have the appropriate level of insurance, the HSE can fine you up to £2,500 every day.

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 marshals

If you already have EL cover, any volunteers or unpaid employees will usually be covered by your policy.