HR Consultant and Employment Advice Insurance

The striking thing about employment claims following HR advice is how rarely they are about whether the decision was right.

A business is usually entitled to dismiss for poor performance, misconduct or redundancy. What makes a dismissal unfair is the route: no proper investigation, a hearing with no notice, no right to be accompanied, the same person investigating and deciding, no appeal, a redundancy pool that was not objectively drawn, consultation that was an announcement, or a sickness dismissal with no occupational health input. All of those are process, all are avoidable, and all are the consultant's territory.

So the advice needs to be specific and documented rather than general and verbal. Set out the steps in writing, with timescales and the reason for each, confirm what was advised after every call rather than relying on a conversation, and record where the client departed from the process. The claims that are difficult to defend are the ones where the file contains a few emails and the client's recollection is that you told them it would be fine.

Setting a limit of indemnity in this profession needs a different calculation from most, because of what some employment claims can reach.

Ordinary unfair dismissal awards are subject to a statutory cap, which bounds the exposure in many cases. Discrimination and whistleblowing claims are not capped at all, and can include loss of earnings over a long period, injury to feelings, aggravated awards and costs. A single discrimination claim arising from a process a consultant designed, in a business with a senior employee on a substantial salary, can produce a figure far beyond anything a small consultancy's fee income would suggest.

So anchor the limit to what a client could lose rather than what you charge, and consider the largest employer you advise rather than the typical one. A consultancy with one client employing four hundred people carries a very different exposure from one advising twenty small businesses at the same fee level. Also check whether defence costs sit inside the limit, because employment matters generate costs over a long period and tribunal preparation is not cheap even where the claim fails.

Most HR consultants are not solicitors, clients do not distinguish, and the gap is where a surprising amount of exposure accumulates.

Clients ask whether a restrictive covenant is enforceable, whether a settlement agreement is binding, whether a TUPE transfer applies, how a contract term would be construed, and whether they would win at tribunal. Those are legal questions. Answering them in an email is giving legal advice without the qualification, the regulatory framework or the insurance that a solicitor has, and the client will rely on it precisely because it came quickly and without a bill.

So the engagement terms should state what the service is and is not, and the habit should match: refer genuinely legal questions rather than answering them, say plainly when something needs a solicitor, and avoid predicting tribunal outcomes. Where you draft a settlement agreement or advise on enforceability because the client will not pay for a solicitor, understand that you have taken on a solicitor's exposure at a consultant's fee. And where you represent a client at a hearing, that is a materially different service that needs insuring as such.

An HR consultancy's data holdings are more sensitive than those of most professional firms, and it is worth treating them accordingly.

Employee files contain names, addresses, salaries, bank details, performance records, disciplinary papers, grievance allegations about named colleagues, sickness records and sometimes medical reports and occupational health assessments. Health information is special category data. A compromise or a misdirected email does not expose commercial information; it exposes somebody's medical history or an allegation made against them by a colleague, to people who should never see it, and the affected individuals are not your clients.

So the controls need to match. Multi factor authentication without exception, care with attachments and distribution because a misdirected grievance bundle is the classic failure, a single secure location for client files rather than material spread across email and local folders, deletion once there is no reason to hold records, and particular care when a matter concludes. Check how the cyber wording treats special category data and the cost of notifying affected individuals, because those people are not the client who bought the policy.

The limit is the question, because some claims are uncapped. We are an FCA regulated broker and will not tell you we are the best choice. These are the questions that decide it.