Like any business, staffing agencies need insurance to operate safely and responsibly, as well as protect their various assets.
There is a wide range of different insurance and policy types available that focus on protecting different elements of a recruitment business, and those operating within it. Each policy tackles a different risk or liability that staffing agencies often face. This allows for the prevention of avoidable costs and legal conflicts.
The costs of these many insurance types can vary greatly. This is why it is so important for staffing agencies to weigh their options and obtain a foundational understanding of them. This should be done prior to signing any insurance contracts.
Let’s take a closer look at the different types of insurance coverage that your staffing agency may need so you can make an informed decision.
Why Is Insurance So Important For Staffing Agencies?
In the US, the Staffing Services Industry has seen a year-on-year revenue increase of 23%. This puts the 2021 revenue status at a whopping $152 billion.
As the industry continues to grow in both volume and overall worth, staffing agencies need to place new priorities on solid insurance plans. These plans will then protect them from petty lawsuits and penalties that could jeopardize them.
The services that staffing agencies provide set them up for liability risks. Because employment and recruitment agencies act as the middleman between employers and employees, they have legal and contractual obligations to both parties. This can often lead to conflicts of interest.
Staffing insurance is the legal buffer between these three parties, which is why it’s so important. It allows agencies some legroom for when major conflicts or liabilities occur.
Keep Your Staffing Agency Safe With The Right Insurance
The risks that a staffing agency faces are dependent on the services it offers. Consequently, it is up to the owners of staffing agencies to consider what forms of insurance are most needed for legal protection.
However, there are several basic insurance types that any staffing agency would be remiss to ignore. Most states within the US require that staffing agencies carry at least workers’ compensation insurance for employees. But there are many others that serve to protect the assets and interests of everyone involved.
If you own or work at a staffing agency, it is important to become familiar with the following forms of insurance:
1. General Liability Insurance
General liability insurance is one of the most important types of insurance for any business to buy. This is because it provides blanket protection against some of the most common liability issues that a business is likely to run into when dealing with multiple parties.
For example, general liability insurance will cover things like damages to property, advertising issues, third-party injuries, and copyright infringement.
What makes this type of insurance so valuable is its guarantee of coverage should a third party decide to sue, and compensation to the affected party for their potential losses. It also covers a business’s settlement and legal costs in the event of a lawsuit.
2. Workers’ Compensation Insurance
Workers’ compensation insurance is a must-have for staffing agencies. As they are constantly involved in and arranging employment scenarios, a lack of this coverage could have consequences. This type of insurance provides coverage for medical benefits and wage costs should an employee become injured or unable to work after accepting a job.
If a staffing agency recruits an employee to an organization but that employee ends up injuring themselves due to negligence or improper training, they may be unable to work. The employee can then hold the staffing agency responsible for their medical costs and loss of income.
However, the staffing agency won’t have to pay out if they have workers’ compensation insurance. In exchange for the relinquishment of the employee’s right to sue, insurance will cover the financial losses without costing the staffing agency an arm and a leg.
3. Professional Liability Insurance
Professional liability insurance is a form of insurance designed to protect professionals in whatever field or industry they work in. It offers protection from lawsuits, penalties, and other legal claims filed by clients.
Because general liability insurance does not protect professionals against claims pertaining to negligence, misrepresentation, or malpractice, businesses seek out professional liability insurance to shield them from these claims. Also known as Errors and Omissions insurance, this type of insurance will protect businesses or professionals that have been accused of making serious mistakes.
Within the context of a staffing agency, you might need professional liability insurance in the event of a failure to uphold industry requirements or failure to meet contractual deadlines. Another reason for this insurance is to cover the placement of an employee who fails to meet the skills necessary for completing a job.
4. Commercial Property Insurance
Commercial property insurance serves the purpose of covering repair costs for agency-owned property in the event of fire, vandalism, theft, and many other externally influenced catastrophes. Commercial property insurance is considered the bread-and-butter of business insurance options.
This kind of insurance stretches over affected furniture, fixtures, and office equipment. It also covers the general physical space that the agency occupies, but only up to the coverage limit, and minus deductibles. Agencies that rent out office space can receive coverage for any affected office contents.
Staffing agencies often have minimal property exposures, and tend to have a comparatively low risk of general liability lawsuits. This makes commercial property insurance a useful substitute.
5. Commercial Crime Insurance
It is considered pretty standard for agencies of all kinds to invest in a commercial crime insurance plan. Crime and theft are both common occurrences throughout the world. The failure to prepare for them can result in major property damages as well as financial loss.
Commercial crime insurance is designed to cover any financial or property losses that occur as a result of burglary, terrorism, forgery, computer fraud, and of course theft. Regardless of whether an outsider or internal employee is responsible for the crime.
The policies surrounding commercial crime insurance do not usually provide coverage for stolen securities or money. And, they may exclude scenarios that involve employee dishonesty. For this reason, commercial crime is of high value to any staffing agency, in particular temporary or recently founded ones.
Additional Insurance Types
Where possible, staffing agencies should consider the above four insurance policies as the basics for protecting their assets.
However, the list doesn’t stop there. Large-scale agencies or agencies with particularly valuable assets may want to consider some additional insurance plans to cover any potential threat to their business. No matter what shape or form it comes in.
These three insurance types look past the fundamentals of business insurance and into the subtle snags that can trip an entire agency up. Especially in the form of lawsuits and penalties that are difficult to shake off in the long run.
If a staffing agency has a large workforce or operates alongside multiple high-stakes industries, investing in the following three insurance types can provide necessary coverage in times of need.
1. Employment Practices Liability Insurance
Employment practices liability insurance (also known as EPLI) is a fairly recently developed form of insurance. It seeks to protect businesses from claims made by employees about the violation of their legal rights or freedoms. This form of insurance can also be useful in the instance of vicarious liability.
EPLI can protect staffing agencies from claims made by employees on the grounds of wrongful termination, sexual harassment, breach of employment contract, and negligent evaluation. They also cover failure to employ or promote, wrongful infliction of emotional distress, and mismanagement of employee evaluation plans.
There is no limit to the maximum sum that can be awarded to an employee claiming discrimination and harassment, so the financial protection provided by an employment practices liability insurance policy is invaluable. Even though it usually occurs within the context of a large corporation, businesses and agencies of every kind are vulnerable to this kind of disruption.
2. Cyber Liability Insurance
As the number of cyberattacks and data security breaches continues to rise, more and more businesses are starting to set up insurance plans that protect them from these damaging incidents. Cyber liability insurance is an insurance policy that provides financial coverage that comes as a result of a cyberattack.
When it comes to cyberattacks, virtually no business is safe. Some of the biggest, most successful brands in the world have had their data security leaked. This has resulted in mass financial loss and the additional loss of data that is essential to the maintenance of the organization.
Cyber liability insurance may not be able to retrieve lost data. But it can provide businesses with a number of coverage options that offer protection against these common attacks. Some insurance providers also provide risk mitigation services and tools to help you identify and avoid cyber threats before they happen, such as endpoint protection and security services.
3. Computers and Media Coverage
Sometimes referred to as Electronic Data Processing Coverage, computer and media coverage aims to either replace or restore lost digital assets that come as a result of vandalism, theft, and sometimes malware.
Some of the policies found in a computer and media coverage insurance plan may also cover repairs to hardware and software. Both of which can be extremely valuable to any organization.
This type of insurance is becoming less and less unusual for businesses to invest in. Especially considering the high number of businesses that rely on computers and media to fulfill day-to-day tasks and employment expectations.
Pro Tips For Getting Staffing Agency Insurance
Although obtaining insurance for your staffing agency is critical to its success, the process is often not as simple as one would like it to be. There are many legal loopholes to climb through, and being sucked into a bad deal is much easier than it seems.
Keep these tips in mind when assessing different insurance policy options:
- Always compare quotes. The fastest way to secure a good insurance plan is to review your various insurance quote options alongside someone who understands the process on a foundational level.
- Understand your needs. Many people misunderstand “staffing agency” for employment or recruitment agency. Even though there are definite similarities, always come prepared to explain the exact needs and expectations you have for your agency.
- Go with an experienced agent. You don’t want to make a deal with an insurance company that doesn’t have a strong reputation. Make sure to hire an agent that knows exactly what they are doing.
Whether your staffing agency is a large, well-established company, or a small business that’s just starting out, finding the right insurance can make or break your business’ success.
Fortunately for staffing agencies, there are many reliable insurance plan options to protect your staffing agency from becoming unnecessarily involved in legal drama.
When going into the business of obtaining insurance plans, remember to identify risks with a trusted insurance broker. This way, you can get the best possible protection for your agency at the best possible price.