Insurance for Recruitment Agencies Entering the US Staffing Industry
The US is the land of opportunity, so it is natural to get excited at the prospect of expanding your UK recruitment agency there.
But as with any opportunity, there’s also a degree of risk. Growing into new territories means getting up to date with regulatory and legal requirements.
That’s why insurance for recruitment agencies exists, to help mitigate risks and keep you protected so you can grow with confidence. Partnering with expert providers will help ensure you stay on the right track whether you want to recruit in the US market from your UK office, or whether you want to land and expand stateside with a new entity.
That’s why we asked Qdos Contractor to contribute to this blog and offer advice on what the insurance needs are for recruitment agencies entering the US market.
Recruit in the US staffing industry from afar or by opening a separate US company
If you’re thinking of entering the US market, one of the first things to weigh up is how you’ll expand.
Will you operate via a UK business? Or will you set up a separate entity, registered as a business in the US? Either way, here’s what recruitment agencies need to think about from an insurance perspective:
Insurance for Recruitment Agencies Operating in the US via your company registered in the UK
If you plan on placing workers with US clients via your existing UK business, the first step will be to consider your current agency insurance arrangements.
It’s tempting to think that cover held for the UK business will automatically apply for claims under US jurisdiction, but it’s unlikely to be the case. And in fact, most UK insurers automatically exclude claims in relation to North American work under their standard terms.
So your first call should be to your existing provider. This will help you get to grips with the scope and cost of extending the current policies to new territories.
It also goes without saying that you’ll probably want to shop around and get a quote from another recruitment agency insurer to compare terms and costs.
At PGC, we see many UK recruitment agencies entering the US market using our recruit from afar model as it enables them to test the market out and develop relationships with clients before making the financial commitment of opening a US office.
Insurance for Recruitment Agencies Registering as a US Business
If you’re going to place workers with US clients through a new US-registered business, the process will be very similar to the above. Take advice and shop around. However, it’s likely that a separate policy will be required for your US company, and you might also need to consider the local conventions of the State in which you set up.
Outside of insurance for your recruitment agency, if you are interested in the other key steps you’ll need to take for setting up your business, you’ll want to read our detailed 8-step guide to landing and expanding in the US based on our 23 years of experience.
Insurance considerations for UK recruitment agencies operating in the US
Whatever your decision, you’ll need to determine the policies and level of coverage required.
Some basics to bear in mind are:
The split of work between the UK and the US (along with any other international work)
The expected rate of growth in US placements
The contractual terms:
Is your agency liable only for its own actions or contractually liable for the actions of placed workers?
Are levels of cover stipulated?
Are contracts governed by UK or US law?
If you’re contractually liable for the actions of workers, which activities or professions are the workers engaged in?
Do any of these requirements differ between US clients and UK clients?
Again, if you’re going to place workers via a new US business, many of the same factors apply. That said, there will be differences between UK coverage and US equivalents, which you’ll need to be aware of.
Subsequently, it is recommended to engage a broker with a US presence to arrange suitable insurance cover for your recruitment agency, given policies following UK conventions might not be suitable for US-registered businesses.
Once you’ve got this first step figured out, you’re ready to start thinking about the insurance policies you’ll need to enable your expansion.
Which insurance policies should a recruitment agency have when operating in the US?
Any business should primarily look to insure its assets. Typically, that means insurance for buildings, contents, portable equipment, IT exposures, and so on.
But beyond these, there are two types of insurance that are particularly relevant to recruiters:
Professional Indemnity – protecting you against claims made by third parties relating to financial losses caused by actual or alleged negligent acts or omissions.
Public Liability – providing cover in the event of personal injury or property damage caused by the policyholder.
In the US, the equivalent covers are referred to as Professional Liability and General Liability. Recruiters looking to set up a separate, US-based business may be required to hold these.
What is Vicarious Liability?
Another important consideration is Vicarious Liability. This isn’t another separate insurance for recruitment agencies, but it’s relevant to both Professional Indemnity and Public Liability insurances.
Essentially, Vicarious Liability relates to the extent to which a policyholder is contractually liable for the actions, errors, or omissions of any workers placed.
As an example, say you place a candidate – let’s call him John – with a client. John has unknowingly caused a significant data breach for his new employer. This might be seen as a negligent act which could leave you open to claims, depending on how your contracts are structured in respect of Vicarious Liability for the actions of the workers.
In short, it’s impossible to imagine every possible scenario where negligence may result in liability for you. As such, you’ll want to ensure your contractual terms across Professional Indemnity and Public Liability are structured correctly.
What is Employers’ Liability?
Employers’ Liability is a legal requirement for all UK businesses and will typically be provided alongside Public Liability insurance.
Whilst recruiters aren’t typically seen as the employer of contract staff, it’s possible that you may be drawn into spurious or complex claims. Having an Employers’ Liability policy in place protects you against this. Cover will also protect against claims in respect of injury to a recruiter’s own internal staff and meet your legal requirements.
Recruitment agencies in the US should also consider the potential need to carry Workers’ Compensation insurance. There are similarities between Workers’ Compensation and Employers’ Liability insurance, but it’s an extremely complex area. Needless to say, it’s important to chat through any arrangements with an insurance expert to work out what you might need.
When you payroll contractors through a Compliance Partner like PGC, you can be rest assured that you will be covered in this regard. PGC maintains compliant workers’ compensation coverage with a top-tier carrier that specializes in the contingent workforce industry, ensuring your workforce has the required coverage.
What level of insurance cover do recruitment agencies need?
In truth, there’s no ‘one size fits all’ answer. Although, reviewing your contracts is a good starting point – levels of cover are frequently stipulated by hirers (and sometimes by other parties in the supply chain).
In general, Public Liability and Professional Indemnity policies will start at £1m cover, with many businesses required to carry up to £10m in some cases. Insurers can also go beyond this and higher limits are available, but it’s rare that you’ll need to secure coverage above this.
Want help to understand what insurance your recruitment agency needs?
Whether you’re an established headhunter, the director of an up-and-coming agency or taking the first steps to set up your own recruitment agency, Qdos can support you with your insurance needs.
With over 25 years of contingent labour expertise, they provide award-winning, competitively priced insurance solutions to thousands of agencies and are owned by a leading global insurer, making them uniquely positioned to assist.
Discuss your requirements with Qdos’ recruitment insurance expert, Dominic Johns, at djohns@qdoscontractor.com or call 07984 829 412.
Want more information on US employment?
If you need guidance on how to start recruiting in the US market, PGC is here to help! We’ve been helping UK recruiters make placements with US clients for over 23 years now, ensuring all things payroll and compliance are covered.
If you are interested in seeing what opportunities exist in the US for you, find out how we can help get you started in the largest staffing market in the world!
Disclaimer: PGC does not endorse any personal views or opinions of the guest blogger. All information here is for general informational purposes only and is not intended to be a substitute for professional and/or legal services.