An Introduction to Insurance for the Recruitment Industry

Introduction to Insurance for Recruitment graphic

Recruitment Agencies make up a unique and vital part of the economy. However, in this ever more litigious world – and with a shrinking working-age population leading to more competition for jobs – how should recruitment agencies prepare for when things go wrong?

In terms of insurance, you’d be forgiven for thinking that recruitment agencies’ requirements would be the same as any other business, however, you would be quite wrong. As well as all the liabilities that are commonplace in the business world, recruitment agencies must contend with a few different and daunting risks.

Skill

Your team are professionals. You know that, but perhaps you didn’t realise that this brings with it some serious implications. If you or your team make errors in your capacity as a recruitment professional and your client experiences loss, then you may be liable. The key term here is ‘professional capacity’ – your client is using you because you are professionals and if you fail to perform accordingly then you could have to foot the bill for any damages.

Confidentiality

The chances are that you and your clients are bound by some sort of confidentiality agreement. Any breach of confidentiality can lead to costly claims due to the severe damages or fines that can be involved in confidentiality. Combine this with the importance of data protection and the potential fines for a breach and you can understand the risks that you are facing daily. What would happen if a CV went out to the wrong person? Or the wrong bank details were provided to a client?

Workers

Depending on the area in which your agency works, your contracts and your clients’ requirements, you may be taking on some risk when you place workers. Firstly, all the vetting and verification done to ensure the workers you place are qualified, experienced and suitable is your responsibility, so if it proves to have been done poorly and you’ve missed something important, you may be liable. Secondly, are you responsible for the actions of your workers? Depending on your contracts, you may be responsible for the production of your workers and you may be liable for the failings of your workers.

So, how do you address the risks faced in the recruitment industry?

Short answer: specialist recruitment insurance.

Long answer: your position as a skilled professional and the actions you take are protected by Professional Indemnity insurance. This insurance is designed explicitly to protect you in your professional capacity and you can read more about whether recruitment agencies needs professional indemnity insurance elsewhere on our blog. Professional Indemnity should also protect you from accidental breaches of confidentiality, but this depends on your policy, so be sure to check. You should receive most of the cover you require for data protection under the Public Liability section of your policy, however, again, this depends on the policy wording, so check. And finally, if you are responsible for the actions of temporary workers that you have placed, you may well also need vicarious liability.

Read more about RecruiterCover’s specialist insurance for recruitment agencies.