Insurance
All business must carry appropriate insurance to protect their premises, visitors to their premises, workers, and the business itself. In addition, depending on the sector(s) the business operates in additional insurance may be advisable. Clients may also require certain insurance to a specified level for each contract. This section explains in more detail the types of insurance a recruitment business might need.
Members can obtain more detailed advice from the REC’s insurance business partners.
Further information about insurance can also be found in the REC's guide to starting an agency in the health and social care sector.
As a recruitment business what type of insurance do I need?
In setting up a business one of the most important business decisions is the question: how can I protect my livelihood should anything happen that I haven’t foreseen previously?
Of course there are the normal types of risks that you would think of covering by insurance such as premises and equipment etc, but as a professional firm there are also risks that you may not be immediately aware of but should certainly consider insuring against. The most common types of cover available are as follows:
- Premises and Contents Insurance
- Employers Liability Insurance
- Public Liability Insurance
- Professional Indemnity Insurance
- Insurance for your temporary workers
This section outlines the more usual types of insurances available but the list is certainly not exhaustive. Any specialist types of cover can normally be arranged, however it is vital that your insurance advisors understand your industry and the way that you work. Members should consult one of the REC recommended insurance brokers, who have made a commitment to ensure that they are familiar with the way that you work and understand how changing legislation being introduced and affecting your industry can be adequately covered.
Premises and contents insurance
Some thought should be given to what extent your business may suffer in the event of a serious fire or flood by covering damage to your physical property against fire, theft, water damage and usual perils. If the damage is so severe that you are unable to recommence trading immediately you should protect yourself with a Loss of Profits of Increased Cost of Working policy to ensure that your trading position is unaltered as far as possible following a physical loss.
Employers’ Liability Insurance
By law, any business employing staff must have sufficient Employers’ Liability (EL) insurance provided by an authorised insurance company. EL covers you against liability claims from your own employees for accidents or ill health that they may suffer whilst working and that are due to the negligence of you, their employer. For example, the illnesses arising from working down a mine or with asbestos without protective equipment. By law you must have insurance with a limit of at least £5 million, although most policies provide £10 million.
Whilst the main purpose of this cover is to protect your own staff safety whilst working for you, you should also ensure that cover is extended to include your temporary workforce if there is any doubt as to whether you or your clients are providing such cover. It is likely the client’s policy will cover all staff working on their premises but you should not assume this to be the case.
Public Liability Insurance
Although not a legal requirement, it would be advisable to ensure that any injury or damage to third parties caused as a result of your negligence is suitably covered. Public Liability (PL) insurance covers your business for damages and legal costs arising from claims for bodily injury or damage to property of a third party caused negligently during your business’ activities. For instance if you have temps or clients visiting you, then you owe a legal duty under common law for their safety whilst on your premises. If a visitor tripped on the electrical cable that was not secured, or slipped on that puddle of water that you hadn’t mopped up, then they would undoubtedly sue you for damages and in all likelihood win! Equally if you or your employees conduct your business negligently on other premises and cause harm as result PL will cover you. Typically policies provide cover of between £1million and £5 million but more can be negotiated.
Professional Indemnity Insurance
Many professions such as accountants, doctors, surveyors and even insurance brokers have a regulatory requirement to have sufficient Professional Indemnity cover and whilst this is not yet the case for the recruitment industry it is certainly a cover that you should consider. Essentially professional indemnity cover is designed to protect you and the business against claims from your customers and consultants arising from a breach of the professional duty of care you owe to them. Such claims could arise from an employee sending out a candidates CV to their existing employer; not checking temps’ references or qualifications before assignment; breaching confidentiality; libelling a rival - the list is endless. Many such claims do arise as a result of some form of fee dispute and you have to analyse whether you have either the time or money to defend what you may consider to be frivolous claims. You may feel that with the way that you operate such mistakes will never happen, but do you have the same certainty in respect of your staff?
Insurance cover for temporary workers generally
Acting under REC model terms of business usually provides you with some form of protection against either your own actions or those of the temporary staff supplied. However these must be seen only as a first line of defence of any litigation against you and there are circumstances where a Court may decide that these terms are either not enforceable or breach unfair contract terms legislation leaving you with ultimate responsibility and accountability. Also, more and more clients of agencies are insisting on business being conducted under their own terms of business where they are seeking to dilute, if not escape, the normal separation of liabilities established by REC terms. It is therefore essential that you seek advice from your insurance advisors before entering into such contracts to ensure that you do have cover already in place or can amend your insurances to provide adequate cover against these contingencies. All insurance policies contain a warranty concerning the declaration of material facts and if you alter the way that you do business without first telling your insurers then you could find your policies declared void.
Are there any additional types of insurance necessary for specific types of temporary worker?
Either your, or your client’s, Employers' Liability (EL) and Public Liability (PL) policies will cover temporary workers to some extent but in certain circumstances it is desirable to have additional insurance for certain workers. A few examples are set out below but this is by no means a complete and exhaustive list.
Drivers: Drivers Negligence and Fidelity Bonding
The above types of cover are usually requested by agency clients where the supply of drivers or warehouse personnel are concerned. Drivers’ Negligence covers you against claims made by your customers for damage to vehicles caused by your drivers and Fidelity Bonding is a protection for you in the event of the proven dishonesty of the staff supplied. Both covers are expensive and should only be considered if your customers insist on them. If this is the case, it is advisable to obtain quotations from your insurers before agreeing to them as you may wish to pass on the cost to the customer concerned.
Those Working For The NHS
Locum doctors, nurses, and other health care professionals carrying out clinical duties in the NHS will be covered by the NHS Indemnity policy for clinical negligence. Where applicable NHS bodies should accept full financial liability where negligent harm has occurred and not seek to recover their costs from you or the health care professional involved.
Limited Company Contractors
Limited Company Contractors are supplied by a business and your contract is with the business not an individual. The limited company is required by law to have EL insurance for its own employees unless the contractor is both the owner and sole employee of the business (Employers Liability (Compulsory Insurance) (Amendment) Regulations 2004). In order to protect your client and your own business against the activities of the contractor you should make sure the limited company has PL and, preferably Professional Indemnity insurance if the contractor is performing highly skilled or professional work.
Healthcare Professionals
Further to a review carried out in 2010 by Finlay Scott (the former Chief Executive of the General Medical Council), a recommendation was made to the Secretary of State for Health to require registered healthcare professionals to have appropriate professional indemnity insurance for any liabilities that could arise when they are practising. This was perceived to be a reasonable and cost-effective way for patients to secure a remedy where a healthcare professional was found to be negligent. Following the introduction of the Health Care and Associated Professions (Indemnity Arrangements) Order 2014 in July 2014, certain healthcare professionals now have a statutory obligation to ensure that they have adequate indemnity insurance as a condition of their registration with their professional regulatory body. The professionals are:
- Doctors;
- Dentists/dental care practitioners;
- Optometrists/dispensing opticians;
- Osteopaths;
- Chiropractors;
- Pharmacists/pharmacy technicians;
- Nurses/midwives; and
- Professions regulated by the Health and Care Professions Council (excluding Social Workers).
Although the legislation places the obligation on the health care professionals themselves when they register with their professional body to ensure that they have professional indemnity insurance in place, recruiters will have to check that this condition has been met before the health care professional is supplied or introduced to a hirer, as required under the Conduct Regulations.
Further information can be found in our ‘Guide to starting an agency in the health and social care sector’.
Do REC members have legal expenses cover?
For REC members on Corporate Bands F-I may be entitled to free legal expenses cover. If you receive a claim, you can review the link here for the brochure, which sets out the eligibility criteria for responding to a claim.