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Finding the right candidate for a job opening is hard and can be a big drain on the time and resources of an employer. That’s why they pay recruiters to do the hard work for them.
If a promising candidate doesn’t work out due to a mistake on your end as the recruitment agent, such as a bungled reference check, or if you accidentally leak personal information because your IT system is not secure from hackers, you could face claims for legal and compensation costs.
That’s why it may be a good idea for recruitment agencies to consider taking out a comprehensive insurance policy.
What is professional indemnity insurance for a recruitment agency?
Since you’re providing a professional service, recommending candidates and jobs based on your industry knowledge and expertise, professional indemnity insurance will likely be a key part of your insurance policy. You provide clients with expert advice and prepare candidates for interviews and placements so you’ll want to be protected against any
claims of negligence, breach of confidence, or errors and omissions that cause your client reputational or financial loss.
Imagine, for example, that a candidate misrepresented their experience and successfully applied for a job, leading your client to raise a claim against you. In this instance – even if you were not at fault – you may have to defend yourself. Professional indemnity insurance could help cover the cost of your legal defence, as well as compensation if your client’s claim is successful.
What other types of insurance should a recruitment agency consider?
As a recruitment agency, you may employ a team of recruiters. But even if you only employ one other person, you’ll need employers’ liability insurance worth at least £5 million. The only exception is if your staff are based abroad or members of your immediate family.
Employers’ liability can cover you for injury or illness to your team caused as a result of working for you. This could be anything from a bad back caused by a poor workstation set-up to a broken arm after slipping on a wet floor.
You may also consider adding public liability to your policy, which could cover injuries to third parties, or even their death. It can also provide support if your business activity causes a member of the public’s property to become lost or damaged. For example, if one of your agents spills scalding hot coffee on a candidate who’s visiting your office.
You may also have office equipment, such as phones and laptops, that are vital for your daily work. You might want to consider protecting those under business and office equipment insurance cover, which could help with the cost of repairs or replacement in the event of a disaster, such as a fire, flood, or theft, or have portable equipment insurance to protect them when you’re away visiting clients.
Finally, you’ll be responsible for a lot of highly sensitive information as a recruiter, including candidate salaries, employment histories, client contacts and personnel details. If a hacker locks you out of your IT system or steals data, you could face a host of costs in legal defence, data recovery, and loss of reputation and business. Cyber and data insurance could help to cover these costs.
Do I need recruitment agency insurance?
Aside from your legal responsibility to have employers’ liability insurance if you employ staff in the UK who aren’t family members, there are plenty of reasons to consider a comprehensive recruitment agency insurance policy.
If a client holds you liable for negligence because you fail to check a candidate’s reference, professional indemnity insurance could help cover legal and compensation costs. Or, if your office is broken into and vital equipment stolen, business and office equipment insurance could help with repair or replacement costs.
Public liability insurance, on the other hand, could provide financial support in the event that your business activity causes the death of, or injury to, members of the public – or if you cause their property to be damaged or lost.
» MORE: Does my business need insurance?
What does recruitment agency insurance cover?
Recruitment agency insurance is not one policy, but rather a package of insurance products that can cover you for claims in various situations.
It usually includes:
- professional indemnity insurance
- employers’ liability insurance
- public liability insurance
- business and office equipment insurance
Most insurance providers will allow you to choose the products most relevant to you. You can decide which policies to take out based on your specific business needs.
What isn’t usually covered by recruitment agency insurance?
There are two types of recruitment insurance: non-vicarious and vicarious.
Non-vicarious insurance only covers your business, its activities, and employees. Any candidates you’ve successfully placed would not be covered for claims of negligence or injuries they incur.
Vicarious insurance covers the work your placed candidates do for your clients.
You should check your client contracts to determine which recruitment agency insurance you need to be properly covered. Some might hold you responsible for your candidates and their work, while others may stipulate that your liabilities end once the client is placed.
It is also worth thinking about whether you are placing temporary or permanent members of staff as this will have a bearing on the type of insurance you take out.
How much does recruitment agency insurance cost?
This depends on the types of cover you take out, how much cover you decide on, the size of your business and your claims history.
Let’s take professional indemnity as an example. If you specialise in placing candidates on high salaries in top jobs at multinational companies, the chances of expensive negligence claims are likely to be higher than if you placed the lowest paid candidates in smaller firms, so your insurer will place a greater premium on your policy as a result.
The cost of your recruitment agency insurance will also depend on which products you choose to include. The more types of insurance you take out, the higher your premium is likely to be.
» MORE: Compare business insurance
Recruitment Agency Insurance FAQs
A recruitment agency could consider an insurance policy that includes professional indemnity insurance, public liability insurance, business and office equipment insurance, and cyber and data cover.
If you employ any staff in the UK and outside your immediate family you are legally required to have employers’ liability insurance worth at least £5 million. You can be fined £2,500 a day if you fail to have this properly in place.
As a recruiter, the amount of professional indemnity insurance you need will be dictated by the nature of your contracts, the types of cover you choose for your policy and the industries that you specialise in.
For example, placing candidates in high-level, highly paid positions will generally result in higher premiums because the risk of more expensive claims would be greater than it might be with lower paid candidates.
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