Recruitment Consultants
Recruitment consultants source candidates for their clients, screen, select and place them in appropriate roles, ensuring that they are successfully implemented in their new environment. They usually work on a commission basis but also charge specific fees for individual searches.
They need a thorough understanding of their clients’ requirements, as well as the necessary skills and/or connections in the advertising and marketing industries.
Their exposure to risk depends on the role that they undertake for their clients.
At the low hazard end, there is entry level administrative staff; placements where
salaries are low and expectations are similarly realistic. At the opposite end of
the scale are the head-hunting and Executive/Director level staff, where there will
be a greater responsibility on them to ensure confidentiality, suitability and the
qualifying of a candidates background i.e. qualifications, experience, previous
employment history, references etc.
What do insurers look for?
Size of firm – The overall size of the firm, based on total turnover, is taken into consideration.
Type of business – Insurers will examine the proportion of temporary or permanent staff placed and also the types of industry that they are placed in.
Medical/nursing/community care staff are working in a high risk industry, where the potential consequences of negligent acts are significant. If the Recruitment Consultant places an unsuitable candidate, the potential for a large claim is far greater.
Clerical/IT and other office based staff are considered low hazard
Heavy industry/Railway/Aviation/Petrochemical and Offshore workersalso fall into the high risk category. Again the incorrect placement of staff as a result of the negligent act, error or omission of the recruitment consultant can have substantial consequences and lead to large claims.
Financial/Banking – In this industry, the main concern is where the placement involves high earners in senior and executive roles. Normally, this would be associated with head hunting and a greater exposure to breach of confidentiality.
Risk factors – In addition to the type of industry in which the recruitment consultant is placing candidates, other factors include:
- Procedures for verifying qualifications and following up responses e.g. do they refer potential staff to their clients prior to selection or placement.
- Whether they work to standard contract terms and conditions with their clients.
- Procedures for ensuring confidentiality.
- The acceptance of contractual liability for the acts of workers who they have placed will be of particular interest.
Claims – as with any PI risk underwriters will look at the claims record. High claims frequency usually reflects the quality of the consultant, their staff and their internal risk management.
Contract sizes - On particularly large contracts, Insurers will be interested in the extent of the Recruitment Consultants responsibilities and also whether they are adequately resourced. It will also be of use to know how reliant on this contract the Recruitment Consultant is. If an Insured is almost solely dependant on one client, it can make the handling of any claims very awkward.
Overseas exposure - Does the practice carry out work for overseas clients? Careful consideration would be paid to such work carried out for US or Canadian clients.
Retroactive exposure - Does the practice have an exposure to claims arising from past work, whether in the current firm or a former practice?
Download
Recruitment Consultants brochure.
Examples of claims
Irrecoverable fees – Often claims can be avoided (and therefore
business relationships saved) by consideration being given to waiving outstanding
fees owed. Where it can be shown that the pursuit of such fees would result in a
greater counter-claim, then the cover allows us to work with the Insured closely
and potentially reimburse the outstanding fees.
Unsuitable Candidate – an example of a claim for an unsuitable
candidate would be if the insured placed an employee with the Claimant company.
It transpires that the employee was not equipped to do the job and was in fact negligent
in the performance of his/her duties resulting in a dismissal. The Insured failed
to confirm the accuracy of the candidate's qualifications and references and was
therefore liable for losses caused to the claimant by the candidate and the expenses
incurred by the claimant in the employment process.
What else you should look for?
Understand the risk - The most important thing is to understand the risk you are presenting to insurers as best you can. The better you understand the risk then the greater your ability to present it to Insurers. Try to pre-empt any questions the underwriters might ask by giving comprehensive information.
The key areas to look out for are:
- The Size (turnover) or the firm
- The type of industry that they are recruiting for (clerical/medical/financial etc)
- Are they mainly placing temporary or permanent staff
- Do they accept contractual liability for the work of the staff they place
What is covered
- Claims made against the Insured arising from
- Any breach of Professional Duty
- Libel or slander
- Unintentional breach of confidentiality
- Unintentional infringement of intellectual property rights
- Loss of or damage to documents
- Dishonesty of employees
- Any civil liability
- Recovery of the Insured’s commission where a client is dissatisfied with the work and has threatened to bring a claim
- Any loss arising from the negligent act of any person placed by the Insured as a consequence of a breach of the Insured’s professional duty.
- The legal costs of prosecuting claims for infringement of intellectual property rights (sub-limit £25,000 in the aggregate)
- All legal costs for representation at any enquiry which has a direct relevance to any claim or circumstance
- Legal defence costs (lawyers, court costs, experts etc.) which are payable in addition to the Indemnity Limit
The usual exclusions
- Risks that should be insured elsewhere e.g. Employers Liability, Public / Products Liability, Property, Land etc
- Whilst our standard cover gives protection for work undertaken anywhere it does exclude North American Jurisdiction.
- War, Terrorism & Nuclear risks
- Work done prior to any retroactive date shown in the policy schedule. If you need this cover extended then speak to your broker.
- Where the rights of recovery are restricted or your duty of care is extended beyond that which would apply at common law by contract.
- The Excess
- Claims and circumstances known at inception of cover
- Trading Losses, Fines and Penalties, Insolvency or bankruptcy of the Insured
- Viruses
