What insurance do recruitment agencies and consultants need?
When placing permanent and temporary staff into new roles, recruitment agencies and recruitment consultants are exposed to many risks.
This could include a client claiming you have completed an improper reference check on a candidate, an employee who is injured at work or a cyber attack leaking sensitive candidate details.
Recruitment agencies can protect themselves against these kinds of risks and the financial burden they can inflict by being covered with the right insurance for recruitment business.
If you’ve just launched your own recruitment agency or recruitment consultancy service, it’s essential to consider the insurance cover you may need before you begin working. If you get your policies in place right away, to the level of cover your recruitment business needs, you’ll be protected against unpredictable claims from the get-go.
In this article, we’ll take you through the types of insurance cover that is usually considered essential for all types of recruitment agencies and recruitment consultants including professional indemnity insurance, public liability insurance and employers' liability insurance as well as other popular insurance policies like legal expenses insurance and office insurance.
Please note that our policy is designed to cover your business and the actions of your employees who are directly employed by you for these purposes. We do not cover the actions of staff that are supplied to customers.
Professional indemnity insurance
Professional indemnity insurance is considered an essential type of insurance for recruitment agencies and consultancies.
This is because it protects your business if you need to defend any allegations of mistakes or negligence in the services you have provided to a client, for example if your client claims you have provided them with wrongful or inaccurate advice.
Professional indemnity also covers instances where companies accidentally share confidential client information or accidentally breach copyright.
To summarise, professional indemnity insurance covers:
- Professional negligence - such as making a mistake in a piece of work for a client or giving them poor advice
- Unintentional breach of confidentiality - such as sharing sensitive client information without permission
- Unintentional breach of copyright - such as using an image on your website without permission
- Defamation and libel - such as making false comments about a competitor or client that damage their reputation
- Loss of documents or data
- Loss of money or goods (for which you are responsible)
Professional indemnity insurance will cover any legal costs or expenses incurred defending the allegations as well as any compensation payments that may be due to your client as a result of your mistake. This prevents you from having to pay this out of your own company finances.
Public liability insurance
Public liability insurance is another type of insurance commonly taken out by recruitment agencies and recruitment consultants to protect them when dealing with clients and members of the public.
If for example a third party, like a client, accidentally trips on a wire and suffers an injury while visiting your premises for a meeting and makes a compensation claim against you, public liability insurance would protect your business.
It would also cover your business if property damage were caused by you or your business operation.
In summary, public liability insurance will cover:
• Injury to any person
• Loss or damage to material property
• Libel, slander or defamation
• Wrongful arrest, imprisonment or eviction of any person
• Wrongful accusation of shoplifting
• Trespass, nuisance or any interference with right of way, by foot, air or water.
Public liability insurance will pay your legal liability for damages and costs awarded against you arising from any of these type of claims.
Public liability insurance does not cover claims made by your employees. For this, you would need employers’ liability insurance explained below.
Employers' liability insurance
If you have one or more employees working for you on a full or part-time basis, holding employers’ liability insurance is a legal requirement under the Employers Liability Act (1969).
In 2019/ 2020, 1.6 million working people suffered from a work-related illness and a total of 38.8 million working days were lost due to work-related illness and workplace injury (2).
When you’re an employer, the health and safety of employees while they’re working for you is your responsibility. This means that if one of your employees is injured while they’re at work, for example if they slip on a wet floor, your business is responsible.
If an employee or former employee, suffers an injury or illness and makes a claim against you, employers’ liability insurance will cover the legal costs resulting from the claim, including damages and costs awarded against you.
To summarise, employers‘ liability insurance covers:
- Injury suffered by your employees during or arising from their employment with you
- Illness suffered by your employees during or arising from their employment with you
Under the Employers Liability Act, employers must be insured with employers’ liability insurance for a minimum of £5,000,000. Failing to hold employers’ liability insurance when you have employees can lead to penalties of up to £2,500 per day.
It’s important to note that this cover refers to the employees that are working in your recruitment agency business only and not to the staff you supply for clients.
Legal expenses insurance
Legal expenses insurance can be a lifeline for any business, protecting you from a wide range of legal costs.
This can include contract disputes, including recovering debts owed by clients, tax enquiries and employment disputes with former employees. Despite being cautious, even the most careful of businesses can encounter these stressful and unpredictable situations, which in many cases can quickly rack up thousands of pounds in legal fees.
Markel Direct’s legal expenses insurance provides up to £100,000 of cover against a range of legal matters your business could be involved in, including:
- Contract disputes
- Tax investigations (including IR35)
- Jury service attendance
- Health & Safety investigations
- Employment disputes
Legal expenses insurance will pay your costs and expenses, as well as compensation owed, if a claim against you is successful.
It's worth noting that professional indemnity insurance and public liability insurance won't cover you against these scenarios – which is why it’s important to also consider legal expenses insurance to be fully protected.
Directors and officers insurance
If your business has directors or officers, there’s a chance that you could be held personally accountable for a mistake made or an allegation of negligence.
There’s a general misunderstanding that claims cannot be brought against you personally if you’re working in a limited company, but if you’re a director or officer of the business, they can.
This for example could be a claim for suspected fraud following an SFO (serious fraud office) investigation or for misappropriation of tax payments following a HMRC investigation.
Overall, directors and officers insurance will cover:
- The defence of any legal action seeking your disqualification as a director
- Any investigations
- Extradition proceedings (including appeals)
In addition, directors and officers insurance at Markel Direct also provides a PR (public relations) crisis management service covering your costs in using public relations specialist to deal with adverse press, publicity or media attention within the United Kingdom where there is a risk to your livelihood as a consequence of such attention.
This type of cover will pay for your legal liability as a director or officer of the business as well your legal costs and expenses.
To find out more about directors and officers insurance, or to get a free quote, click here.
When you run a business, whether that’s from an office or from home, your office contents and equipment including your computers, laptops, printers and furniture such as desks, stationery and documents are all crucial to the job. If these items are stolen or if an accident such as a fire occurs leaving them unusable, this could prevent you and your team from being able to do your job.
These items, owned by the business, would not usually be covered under a household insurance policy, which is why office insurance, even when working from home, can be of benefit to recruitment agencies.
Office insurance includes buildings and contents cover, business equipment cover and business interruption cover to protect your property against a range of risks.
Office insurance, depending on your insurance policy, can cover your office premises and business equipment from accidental damage and disasters caused by theft, flooding, fire and more. The business interruption aspect of the insurance will cover any loss of income you suffer if you’re left unable to work from your usual business premises.
If you spend time working away from the office, for example at client premises, you can select to have your equipment covered when you’re working off site too.
Occupational personal accident insurance
When you’re self-employed, there’s no sick pay provided when you’re not well enough to work. A way around this is having insurance to cover you in instances where an accident leaves you unable to work.
Occupational personal accident insurance will pay you weekly benefits to support your income if you are involved in an accident at work, or on your way to and from work, that leaves you unable to work.
This for example could be an injury sustained due to a road traffic accident on your commute in to work that leaves you hospitalised and in recovery for a few months. If you recruit for clients in manufacturing or engineering, you may need to visit them on site in factories and workshops that operate high risk machinery. If on this trip, you’re involved in an accident that results in you suffering a head injury, occupational personal accident insurance will cover you financially while you’re out of action.
Insured individuals may be able to choose between receiving a weekly benefit or a lump sum payout.
As a recruiter, you’re constantly handling private candidate data. You might be holding sensitive medical records on your server and copies of candidate identification such as passports and driving licenses as well as national insurance numbers and even bank card details, depending on whether candidates are contracting through your agency.
If you are a victim of a malicious cyber-attack, this sensitive informative could get into the wrong hands and leave you facing serious financial repercussions.
As well as your clients and candidate’s data being at risk, so is your own. This could result in a hacker taking down your website or accessing your emails, which could be damaging for your reputation.
Unfortunately, cyber attacks are a serious threat to businesses of all kinds, with four in ten businesses having reported a cyber security breach or attack in the last 12 months (1). Given this, cyber and data risks insurance could be invaluable to your business.
Buying recruitment agency insurance
With many different types of insurance to consider, buying insurance that’s right for your business can feel like a difficult task. Before you go ahead and buy insurance, make sure you have read the information pages for each policy and fully understand what it does and does not cover. If you have any doubts on this, you can always chat to an insurance adviser to gain a clearer understanding.
If you do have employees, make sure you add employers’ liability insurance to your insurance package as this is a legal requirement. While the other policies are optional, some clients you work with may specify that you need to have certain types of insurance, like professional indemnity insurance, in your contract so make sure you have clarified this before choosing your insurance policies and level of cover.
*Please note, whilst Markel’s professional indemnity, public liability, employers’ liability and occupational personal accident policies provide protection for the recruitment agency or recruitment consultant for their professional services in finding suitable candidates for their client, it does not provide cover for the staff supplied or their actions whilst at their placement.
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