Recruitment and Employment Agency Insurance
A recruitment agency's exposure is unusual because it sits in the gap between two other businesses: the candidate you placed and the client they are working for.
In The Gap Between Candidate And Client
On permanent placements the risk is mainly about the process. A candidate whose qualifications were not what you said, references that were not taken, a right to work check that was not done, or a rejected applicant who says the reason was discriminatory. The loss is the client's recruitment cost and disruption, or a tribunal.
On temporary placements it changes shape entirely. You are supplying a worker into premises you have never visited, doing work you cannot supervise, and depending on the arrangement you may be their employer. If they are injured, or if they injure somebody else, the question of whose liability answers is decided by paperwork written long before the incident.
What Recruitment Agency Insurance Covers
Professional indemnity
Vetting, references, qualification checks and right to work failures, and advice about a placement that cost the client money. The mechanics of the cover are on our professional indemnity page.
Employers' liability for temporary workers
The section that defines a temp agency. Where you are the employer of a supplied worker, an injury on a client's site is your employers' liability claim even though you were not there. Compulsory at a £5 million statutory minimum.
Public liability for the acts of supplied workers
A temporary worker who damages a client's property or injures a third party while working. Whether that falls to you or to the client is decided by the terms of supply.
Employment practices liability
Discrimination, harassment and unfair treatment claims brought by candidates, applicants and temporary workers. The tribunal exposure is the one agencies most often carry uninsured.
Cyber and candidate data
CVs, identity documents, right to work evidence, references and bank details for a large number of individuals. A breach is a data protection matter at volume.
Fidelity and payroll
Where you run payroll for temporary workers, there is money moving weekly and an internal dishonesty exposure alongside it.
Legal expenses and tribunal representation
Representation at an employment tribunal is a cost in its own right, separate from any award, and these claims arrive with volume rather than singly.
Where The Cover Stops
Wordings differ between insurers, so treat these as the usual position rather than as universal fact. Where one of them matters to you, it is worth checking on your own schedule before you need to.
Who employs the temporary worker
The question that decides whose policy answers. Agency, umbrella, client or self-employed are four different answers with four different consequences, and the terms of supply settle it rather than custom.
Client site conditions you never saw
You are supplying into premises, plant and practices you have not inspected. Where a client's site was unsafe, your worker is still your employee and the recovery against the client is a separate matter.
Vetting you were told to skip
Clients under pressure ask for workers at short notice and accept reduced checks. If something follows, the instruction needs to have been recorded rather than remembered.
Regulated sectors
Healthcare, education and anything involving children or vulnerable adults carries checks that are statutory rather than contractual, and a failure is a regulatory matter as well as a claim.
Driving and plant operation
Supplying drivers or plant operators brings licence and competence checking into the critical path, and a motor exposure that may sit outside a standard agency policy.
Guaranteed placements and rebates
A rebate or free replacement promise is a commercial term rather than insurance, and a candidate leaving is not an insured event.
Settle Who Employs The Temp
Everything about a temporary staffing agency's insurance flows from one question, and a surprising number of agencies have never answered it precisely.
If the agency is the employer, the worker is on your books for employers' liability purposes and an injury on a client's site is your claim, with any recovery from the client a separate matter afterwards. If an umbrella company employs them, that liability sits there, and your exposure becomes the quality of your arrangement with the umbrella. If the worker is genuinely self-employed, the position changes again, and the test is the reality of the arrangement rather than what a contract calls it. And on some models the client becomes the employer for the duration.
The practical consequence is that the terms of supply are an insurance document as much as a commercial one. They should state who employs, who supervises, who provides equipment and protective equipment, who carries out the site induction, and what happens if the client changes the work the worker was supplied for. That last one matters: a worker supplied as a warehouse operative who ends up on a forklift is doing something nobody assessed.
The Tribunal Claim Is The Frequent One
Agencies tend to insure against the dramatic and get claimed against for the procedural.
Discrimination and unfair treatment claims brought by applicants, candidates and temporary workers are the high frequency exposure in this sector: a rejected applicant who believes the reason was age, race, disability or pregnancy; a temporary worker removed from an assignment after raising a concern; a candidate who alleges a consultant's comments were discriminatory. Many are weak and all cost something to respond to, and employment tribunal exposure is frequently uninsured because employment practices liability was never arranged.
The defences are process. Structured criteria recorded against each shortlisting decision, notes of why a candidate was not progressed, consultant training on what cannot be asked or recorded, and a complaint route that resolves things before they become claims. Clients also create this risk by asking for candidates who fit a description, and the answer there is a documented refusal rather than a quiet compliance.
Vetting Is The Professional Exposure
On permanent and regulated placements, the professional claim is almost always that a check was not done or not done properly.
References not taken or taken from somebody who was not who they claimed. Qualifications accepted on a photocopy. A right to work check missed, which carries a civil penalty for the client as well as a claim against you. A DBS check not obtained for a role that required one. A gap in employment nobody asked about. The client's loss is the recruitment cost, the disruption, sometimes a regulatory penalty and occasionally the consequences of what the person then did.
What protects an agency is a vetting file per candidate showing what was checked, when, by whom and with what evidence, kept rather than discarded once the placement is made. And where a client instructs you to place somebody before checks are complete, which happens constantly under pressure, that instruction needs to be in writing. An agency that can produce the email saying start Monday regardless is in an entirely different position from one relying on a recollection.
You Hold A Great Deal Of Personal Data
A recruitment agency holds more sensitive personal data per employee than almost any business of its size, and holds it about people who are not its customers.
CVs with full employment and education history, passports and identity documents, right to work evidence, references, bank details for payroll, sometimes health information for occupational assessments, and DBS results in regulated sectors. All of it for candidates who never became employees and in many cases never got a job, which raises retention questions as well as security ones.
So the exposure is both a breach and a compliance position. On the breach side, candidate data is attractive and an agency database is a target, so cyber cover and multi-factor authentication on the CRM are proportionate rather than cautious. On the compliance side, holding identity documents and CVs indefinitely for candidates who were never placed is difficult to justify, and a subject access request from a disgruntled applicant is a realistic prompt for finding out what you still hold.
How To Choose A Broker For A Recruitment Agency
One question decides most of the policy, and it is not about the agency. We are an FCA regulated broker and will not tell you we are the best choice. These are the questions that decide it.
Have they established who employs your temporary workers?
Agency, umbrella, client or self-employed are four different answers with four different consequences for employers' liability. A broker who has not asked cannot have described your risk.
Is employment practices liability included?
Discrimination and unfair treatment claims from candidates and temps are the high frequency exposure, and tribunal costs are frequently uninsured because this was never arranged.
Does professional indemnity cover vetting failures?
References, qualifications, right to work and DBS are where the professional claims land. Make sure the schedule describes the checks you actually carry out.
Are regulated and driving placements declared?
Healthcare, education, children and vulnerable adults carry statutory checks, and supplying drivers or plant operators brings exposures a standard agency policy may not contemplate.
Does cyber reflect the volume of candidate data?
Identity documents, right to work evidence and bank details for thousands of individuals who are not your employees.
Will they read your terms of supply?
Those terms decide who employs, who supervises and who carries a loss. They are an insurance document as much as a commercial one.
Factually, here is what we do against those questions. We establish who employs your temporary workers before anything else, because that decides whose policy answers an injury, we raise employment practices liability rather than waiting to be asked since the tribunal claims are the frequent ones, we have the vetting you actually perform described on the schedule, and we will read your terms of supply and tell you where they leave a gap. We are a broker, so it goes to several insurers rather than one.
This is one of the few pages in today's batch backed by our own book rather than only by appetite data, so it is work we have placed rather than work we are guessing at.
What Moves The Price
Every policy is priced on the business behind it. These are the things that move the premium:
- Whether you supply temporary workers, and who employs them
- The sectors you place into, with industrial and driving rated higher
- Whether any placements are regulated or involve vulnerable people
- Annual turnover and the temp against perm split
- Whether employment practices liability is included
- The volume of candidate data held
- Whether you run payroll for temporary workers
- Claims and tribunal history
We are a broker, so we take it to several insurers rather than quoting one. Call 02382 000820 for a quote.
What We Need To Quote
- The temp against perm split, by turnover
- Who employs your temporary workers: you, an umbrella, or the client
- The sectors and roles you place into
- Whether any roles are regulated or involve children or vulnerable adults
- Whether you supply drivers or plant operators
- Your vetting process and what evidence is retained
- Whether you run payroll, and the weekly value
- Any claims, tribunal matters or data incidents in five years
Cover that often goes with this
The gaps we most often find sitting next to this policy.
- Management consultantsAdvisory work without supplying people.
- Training providersWhere you train rather than place, and the duty differs.
- Employers' liabilityThe section that decides a temp worker injury claim.
- Cyber insuranceCandidate data at volume, including identity documents.
- Legal expensesTribunal representation, which arrives with volume.
- Talk to a brokerTell us who employs your temporary workers.
Common questions
What insurance does a recruitment agency need?+
Professional indemnity for vetting, references, qualification and right to work failures. Employers' liability at a £5 million statutory minimum, which on a temp agency is the defining section because where you employ the supplied worker an injury on a client's site is your claim. Public liability for the acts of workers you supply. Employment practices liability for discrimination and unfair treatment claims from candidates and temps, which is the high frequency exposure and the one most often uninsured. Then cyber for candidate data, fidelity if you run payroll, and legal expenses for tribunal representation.
Who is liable if a temporary worker is injured on a client's site?+
It depends who employs them, and that is the question deciding most of your policy. If the agency is the employer, it is your employers' liability claim even though you were never on the site, with any recovery from the client a separate matter afterwards. If an umbrella company employs them, the liability sits there and your exposure becomes the quality of your arrangement with the umbrella. If the worker is genuinely self-employed the position changes again, and the test is the reality of the arrangement rather than what the contract calls it. Your terms of supply should settle who employs, supervises and provides equipment.
Are we covered for a discrimination claim from a candidate?+
Only if employment practices liability was arranged, and it frequently has not been, which is why tribunal exposure is the commonest uninsured risk in the sector. The claims are high frequency rather than high value: a rejected applicant who believes the reason was age, race, disability or pregnancy; a temp removed from an assignment after raising a concern; a candidate alleging a consultant's comments were discriminatory. Many are weak and all cost to respond to. The defences are process: recorded shortlisting criteria, notes of why candidates were not progressed, and consultant training on what cannot be asked.
What happens if we place someone and the checks were wrong?+
That is the professional claim in this sector and it is usually about a check not done rather than advice that was wrong. References not taken, or taken from somebody who was not who they claimed. Qualifications accepted on a photocopy. A right to work check missed, which carries a civil penalty for the client as well as a claim against you. A DBS check not obtained where the role required one. What protects you is a vetting file per candidate showing what was checked, when, by whom and with what evidence, kept after placement. And where a client says start Monday regardless, get that in writing.
Do we need cyber cover for candidate data?+
Yes, and the volume is the point. A recruitment agency holds more sensitive personal data per employee than almost any business of its size, and holds it about people who are not its customers: CVs with full employment history, passports and identity documents, right to work evidence, references, payroll bank details, sometimes health information and DBS results. Much of it relates to candidates who were never placed, which raises retention questions as well as security ones. Multi-factor authentication on the CRM and a retention policy you actually apply are proportionate rather than cautious.
Who insures recruitment and employment agencies in the UK?+
It is a defined market with several insurers writing agency risks, generally through brokers, and appetite varies considerably by sector: industrial, driving, healthcare and anything involving vulnerable people are rated separately and sometimes declined. This is a trade we have placed rather than one we are guessing at. What separates placements is whether who employs the temporary worker has been established, whether employment practices liability is included, whether the vetting you actually perform is described, and whether regulated and driving placements have been declared.
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