Recession leading to increase in uninsurable liabilities being forced onto recruitment companies
Recruiters asked to accept uncapped liability for risks beyond their control
The recession is leading to an increase in organisations passing unlimited liabilities onto recruitment companies which cannot be insured, potentially heaping significant extra costs onto recruiters at a time when many are struggling financially, warns the Association of Professional Staffing Companies (APSCo).
APSCo members have reported that they have seen a huge increase in unlimited liabilities being inserted into contracts by client organisations over the previous year and in many professional staffing sectors, such as law and finance, these clauses are starting to appear for the first time.
According to APSCo, recruiters are being asked to accept unlimited liability for risks not only beyond their control but which in some cases will be the direct result of clients actions. As a result, insurers will not provide cover to recruiters for these risks though the clients themselves could obtain cover. These include:
injury or death of workers on end user sites
theft by workers of end users property
claims brought by workers against end users (unfair dismissal, discrimination etc)
APSCo says that recruiters should think carefully about agreeing to liabilities in contracts which they cannot obtain insurance for. APSCo recommends recruiters seek to have uninsured liabilities capped.
Marilyn Davidson, Director of APSCo, comments: This has become a major issue for the recruitment industry over the last few months as end users seek to mitigate unpredictable costs by pushing risks onto recruiters. In many professional staffing sectors these clauses are an entirely new phenomenon.
There has been a trend amongst other providers of professional services, such as accountants and lawyers, to cap the legal liabilities that they are exposed to. End users of staffing services, however, are asking recruiters to go against that trend, which is deeply concerning.
Many of these risks are simply uninsurable, so recruiters need to think carefully about agreeing to risks which could give rise to additional costs that have a significant impact on already squeezed margins.
Recruiters agreeing to unlimited liabilities may find the value of their businesses adversely affected if they later come to sell.
She adds: Unlimited liabilities relating to employment issues are particularly problematic. As lay offs increase and claims against end users relating to dismissal mount, recruiters could find themselves with significant exposure.