Why do Recruitment Consultants need Professional Indemnity Insurance?

One of the key contributing factors for any successful business is the talent they employ, which is why so many businesses invest and seek the expertise of a recruitment consultant. Businesses put their trust into the recruiter’s hands to provide a candidate with not only the appropriate qualifications and experience for the role but also be the right fit for the company’s culture. This puts a lot of onus on to the recruiter to deliver and meet their client’s expectations.

Recruitment Professional Indemnity insurance provides protection for recruitment consultants and their businesses against claims for financial loss as a result of their negligence or breach of professional duty from the recruitment services they provide.  The recruitment consultant’s responsibilities extend far beyond just advertising a role and shortlisting potential candidates. Recruitment Consultants still owe a duty to their clients & candidates even after the candidate has been placed.

Potential Recruitment Professional Indemnity insurance claims can arise from many areas, including but not limited to:

• Failure to do sufficient background, reference & qualification checks of potential candidates which leads to a financial loss to the host employer.
• Failure to complete Work Health & Safety inspections of each host location they place on-hired employees or contractors to ensure it is a safe working environment.

• Failure to apply or retain an appropriate license to operate – Queensland, South Australia and Victoria have all passed labour hire licensing legislation.  If the recruitment consultant has offices in any of those states or places on hired employees or contractors in that state, a license is required otherwise large fines and penalties apply.

In Queensland, the maximum penalty for operating without a license is $400,350++ for the company and $137,987 for an individual or three year’s imprisonment, which is enough to rock the financial stability of any business.

• Placement of a candidate in a position they are not qualified or suited to.

• Insufficient training & support to the on-hired staff or contractors.

• Vicarious liability – Recruitment consultants are not only vicariously liable for their internal staff

but also for the negligent acts or omissions arising from on-hired employees and on-hired contractors’ actions that they place, even though they are under the Host’s supervision.

• Negligent advice in relation to procedures, recruitment or payroll.

• Failure to act to client’s instruction.

• Discrimination or unethical behaviour.

• Breach of confidentiality or loss of documents

When placing Recruitment Professional Indemnity insurance cover for recruitment consultants, there are many underwriting considerations that can lead to variations of cover in the market. Key covers to look for to ensure adequate cover are:

• Cover for all the recruitment consultants’ activities including WH&S checks, payroll and training.
• Cover for permanent placements, on-hired employees and on-hired contractors.
• Cover for all on-hired placements no matter what industry or role they are placed in.
• Cover for on-hired white-collar and blue-collar placements.
• Ensure there is a write-back for property damage and bodily injury within the wording for claims arising from professional services.

Recruitment Consultants are the target business for Berkley Insurance Australia so if you have any queries in relation to the cover or related products such as Public & Products Liability Insurance and Management Liability Insurance, please contact your local Underwriter who would be happy to assist.