How Does Employers Liability Insurance Work with Agency Workers UK?

Using recruitment agencies to source temporary staff is a flexible solution for many UK businesses. However, the introduction of agency workers can blur the lines of responsibility regarding workplace safety and insurance. Under the Employers’ Liability (Compulsory Insurance) Act 1969, determining who holds the liability—the agency or the host employer—is critical. Getting it wrong can expose your business to a £2,500 daily fine from the HSE and severe compensation claims.

What Is the Rule for Agency Workers?

Employers’ liability insurance provides compensation if a worker suffers illness or injury at work. With agency workers, the responsibility typically falls to the party that exercises day-to-day direction and control over the worker. Even though the agency pays the worker and handles HMRC PAYE taxes, if the worker is operating on your premises, using your equipment, and following your instructions, you are generally responsible for their health and safety. Therefore, your employers’ liability policy (ideally with a £10M standard limit) must cover them.

Key Factors in Agency Worker Cover

1. Direction and Control: The host business usually controls the work environment, assuming liability.
2. The Agency’s Role: The agency may have its own cover, but this does not absolve the host business of its legal duties.
3. HSE Enforcement: The HSE will investigate the host employer if an agency worker is injured on-site.
4. RIDDOR Reporting: The host employer must usually report serious workplace incidents involving agency staff under RIDDOR.
5. Certificate of Insurance: You must ensure your certificate of insurance is visible to all workers on site, including temps.

Step-by-Step: Insuring Agency Staff

1. Review Agency Contracts: Clarify insurance responsibilities in your contract with the recruitment agency.
2. Notify Your Insurer: Inform your insurance broker that you use agency staff so they are factored into your policy.
3. Maintain a £10M Standard Limit: Ensure your policy limit is robust enough to cover temporary surges in workforce numbers.
4. Conduct Safety Inductions: Treat agency workers exactly like permanent staff regarding health and safety training.

Common Mistakes

• Assuming the Agency Covers Everything: Host employers frequently assume the agency’s insurance covers workplace accidents. This is a dangerous misconception.
• Excluding Temps from Headcount: Failing to declare agency workers to your insurer can void your policy in the event of a claim.

Real-World Scenario

A logistics company brought in 20 agency workers for the Christmas rush. Assuming the recruitment agency’s insurance covered them, the company did not notify its own insurer. When a worker was injured by a forklift, the ensuing HSE investigation and RIDDOR report revealed the host company was liable. Not only was their insurance invalid due to non-disclosure, but they also faced a £2,500 daily fine for failing to comply with the Employers’ Liability (Compulsory Insurance) Act 1969.

FAQ

Who pays compensation if an agency worker is injured? It is usually the host employer’s insurance that pays, as they control the daily working environment.

Do I need to see the agency’s certificate of insurance? Yes, it is good practice, but you must primarily ensure your own policy covers temporary workers.

Does HMRC tax status affect this liability? While the agency handles HMRC PAYE, the host’s control over the workplace dictates the insurance requirement.

Key Takeaways

• Host employers are generally liable for agency workers under their direction and control.
• Declare all agency workers to your insurer to maintain valid cover.
• The Employers’ Liability (Compulsory Insurance) Act 1969 mandates compliance.
• Non-compliance can result in a £2,500 daily fine.
• Ensure your certificate of insurance is displayed clearly for all temporary staff.

Author bio: Claire Ashford, Cert CII, advises businesses on risk management and temporary workforce insurance compliance.