As a business owner, navigating the various types of insurance required proves challenging. From general liability to property and directors and officers insurance, multiple types are required to protect the business and owners from loss.
Businesses with employees also need workers’ compensation and employment practices liability insurance (EPLI). While both types of insurance are essential for companies with a workforce, they serve different purposes and provide distinct protections.
Read on to learn more about EPLI and how it differs from workers’ compensation insurance.
Insurance Glossary
First, let’s define the two types of insurance.
What is EPLI Insurance?
Employment practices liability insurance, known as EPLI or EPL, protects employers against employee claims regarding discrimination, wrongful termination, harassment or other employment-related matters.
What is Worker’s Compensation Insurance?
Workers’ compensation insurance, also known as workers’ comp, pays benefits to employees who have been injured or disabled due to a work-related accident, illness or injury.
Differences Between Worker’s Comp and EPLI Coverage
These two types of insurance protect employers from financial losses related to their workforce, but the similarities end there. The following table highlights the differences.
| Workers’ Compensation Insurance | Employment Practices Liability Insurance | |
| Purpose | Provides benefits to employees injured or disabled at work | Protects employers from claims related to employment practices |
| Coverage | Medical expenses, rehabilitation costs and lost wages | Legal costs, settlements and judgments for employment-related claims |
| Typical Claims | Work-related injuries, illnesses and disabilities | Discrimination, wrongful termination, harassment and retaliation |
| Beneficiaries | Employees | Employers |
| Legal Requirement | Mandatory in most states | Not mandatory, but highly recommended |
| Impact on Workplace | Promotes workplace safety and employee welfare | Encourages fair employment practices and compliance with laws |
| Premium Factors | Industry risk, claims history, number of employees | Business size, industry, claims history, employee turnover |
| Average cost | Average of $45/mo., according to Insureon | Average of $222/mo., according to Insureon |
Does an Employer Need Workers’ Comp and EPLI Insurance?
Though state laws vary, there’s some sort of workers’ compensation requirement in every state except Texas. That means most employers need to carry a workers’ compensation insurance policy.
EPLI insurance is not required, but strongly recommended. Because workers’ compensation and EPLI insurance serve different purposes, it’s wise for a business owner to take out a policy for both.
To recap, EPLI protects employers from the financial burden of lawsuits related to discrimination, wrongful termination, harassment and other employment-related claims. Workers’ compensation insurance ensures employees are compensated for work-related injuries, illnesses or disabilities. Together, they form a robust risk management strategy for any business with a workforce.
Best Practices to Avoid Worker’s Comp and ECLI Claims
While these liability policies offer a business protection, it’s best not to have to use them. Follow these best practices to promote a safe and fair workplace.
Avoiding Worker’s Compensation Claims
A decrease in workers’ compensation claims points to a safer workplace. Follow these safety best practices:
- Conduct ongoing safety training sessions to educate employees about workplace hazards and safe practices.
- Establish and enforce clear safety protocols and procedures for all tasks, especially those involving physical labor.
- Regularly inspect the workplace to identify potential hazards and address them promptly.
- Perform safety audits and involve employees in identifying areas for improvement.
- Stay current on routine maintenance for company equipment.
- Train employees on the correct use of equipment and tools to prevent accidents.
- Form a safety committee to monitor and improve workplace safety.
Avoiding ECLI Claims
A reduction in EPLI claims signifies a more equitable and respectful workplace. Implement these best practices to minimize the risk of employment-related claims:
- Develop and enforce a comprehensive employee handbook detailing company policies, including those pertaining to discrimination and harassment.
- Conduct regular training sessions on anti-harassment and anti-discrimination policies for all employees.
- Promote diversity and inclusion training to foster a respectful and inclusive workplace culture.
- Use objective criteria for hiring, promotions, and terminations to avoid claims of bias or unfair treatment.
- Encourage open communication, so employees feel comfortable raising concerns.
- Stay informed of changes in employment laws and ensure compliance with federal, state and local regulations.
- Consult with legal counsel to review employment practices and policies regularly.
How Paycor Helps
Managing insurance policies requires comparison shopping, making timely payments and monitoring policies for compliance and improvement opportunities. Paycor’s workers’ compensation solution allows users to automate insurance payments based on payroll and eliminate large down payments and end-of-year surprises. Take a guided tour to learn more.