Public Liability Insurance & Third Parties

[Tutor Me]

Hi,

Would a recruitment agency providing professional services via "self-employed" third parties require LI? Is there a legal requirement or would it just be deemed "best practice"?

Thanks

[INDIZINE]

Im not quite sure what you are saying here. Can you rephrase?

[Tutor Me]

Apologies. An example would be a recruitment agency who source self employed "specialists" to visit customers and provide a service. Would the recruitment agency need to provide public liability insurance to cover any events (accidents etc) which may happen whilst individuals are providing this service? The cruxt being that the individuals are not actually directly employed by the agency so how much responsability/liability would there be on each party?

[INDIZINE]

ok. No. You are not employing them like you would a temp. I imagine you only charge them a referral fee of some type. The contract of service is solely between client and consultant if no contract of service exists betrween you and the client or you and the consultant.

The s/e consultants should have their own professional liability insurance cover. They are fully responsible for their own services and liabilities in any respect.

[Tutor Me]

Ok. We do have T&C's for customers and consultants to agree to however they specifically state the nature of the relationship(s) (ie: consultants are self employed and we just take a commission) so from what you have said the responsibility/liability lies with the consultant?

[INDIZINE]

yes. you are just charging the consultant a referral commission yes? and that they invoice the client direct and the client pays them direct?

[Arnold Soutar 1]

Just be careful here, I have heard of a recruitment agency who specialised in supplying staff on a labour only basis in a particular sector having to have employers liability. Employers liability being a legal requirement.

Not sure of the intricacies of this particular case (i.e. they had no other contracts etc) but it’s worth asking a specialist insurance company for some advice.

[Tutor Me]

yes. you are just charging the consultant a referral commission yes? and that they invoice the client direct and the client pays them direct?

No. The client payment comes via ourselves, we then deduct our commission and pass the remainder onto the consultant on a monthly basis following receipt of an invoice from the consultant for the hours worked that month.

[robwoollen]

You need to be pretty careful of IR35 and other similar (non-limited) legislation. There are a number of tests for self-employment (see here (http://www.hmrc.gov.uk/employment-status/index.htm))

If you are found to be employing these specialists then you will also need to have EL insurance as a minimum. You may then also be liable for their actions (PL).

[Tutor Me]

Yeah we looked at IR 35 when setting things up and actually attended a HMRC workshop and ran it by them. They said that the way we had set our terms up and the irregularity of the work meant that the consultants could be classed as self employed.

[INDIZINE]

Id say that you need to establish that your s/e are hired by you on the basis that they meet HMRC regs for s/e. ie you cannot determine their days or hours worked, cannot train them, pay them holidays, sick, etc. stuff like that.

Once you have determined your s/e meet that criteria (HMRC can confirm this for you) then just make sure this is made clear to both parties in T & C.

Then, they are responsible for their own liability in all respects, as they are not employed by you. You need a disclaimer with the client that you are not responsible for th s/e person. Make sure your T & C are approved by a lawyer if not done so already.

[Tutor Me]

Thanks Indizine. Yeah we had our Terms drawn up by a solicitor specifically with IR 35 in mind and from the feedback HMRC gave us should be ok. We dont do any of the things you listed below which would mean we were acting as an employer...

Id say that you need to establish that your s/e are hired by you on the basis that they meet HMRC regs for s/e. ie you cannot determine their days or hours worked, cannot train them, pay them holidays, sick, etc. stuff like that.

Once you have determined your s/e meet that criteria (HMRC can confirm this for you) then just make sure this is made clear to both parties in T & C.

Then, they are responsible for their own liability in all respects, as they are not employed by you. You need a disclaimer with the client that you are not responsible for th s/e person. Make sure your T & C are approved by a lawyer if not done so already.

[INDIZINE]

sounds like youn have it covered. Its the solicitors job to ensure your T & C cover all those things.

[Ashley]

IMO, things can take a turn for the worse when it comes to being sued, and as most know the water in very muddy when it comes to deciding who is employed and self employed when it comes to employers liability insurance.

The below seem to be the test to being self employed, and unfortunately if one of your subs where to be sued I think it would be very likely that they would look to involve you if they did not have insurance and again if they had a major accident while at one of your clients offices and died, their wife would look in first place to sue your client and I expect their insurance company (public liability) would look to recover from you by seeking full recovery or just refusing to deal with matter and pass buck, and of course without any insurance you will have to fight it out on your own, if you had the insurance you would not even be aware of the issues as they would fight it out themselvesyouyouyou
you deduct national insurance and income tax from the money you pay them;
you have the right to control where and when they work and how they do it;
you supply most materials and equipment;
you have a right to any profit your workers make although you may choose to share this with them through commission, performance pay sharthecompanyanyanyany. Similarly, you will be responsible for any losses;
you require that person only to deliver the service and they cannot employ a substitute if they are unable to do the work;
they are treated in the same way as other employees, for example, if they do the same work under the same conditions as someone you employ.I am not sure of how differet combinations of the above apply.

Depending on yearly cost, I would get the insurance and in the case of a claim let them fight it out. If the cost is preventative I would look to get advise from a law firm, and have them issue their advice in writing, this way if the advice is wrong (and it may could be as there really is no hard and fast rules) you could recover any costs from them (well their insurance).

My only worry there would be a caveat from the lawyers that "the situation at the time of writing is xxx, we can not comment on the future viability of this advice due to Regulatory Alterations and decisions taken by the Courts having major implications on this advice which would render this advice unsafe". It could be worded one of 1000 ways but that would mean it was almost worthless as a get of jail free card.

[anthony15]

I am presuming you are a Ltd company? In which case you need employers liability anyway. Even if you don't actually employ any one, it provides cover for any thing your company may do wrong. I have been through this with a broker as we used to take on self employed drivers, they would sub-contract for us on jobs. We had to have employers liability by law to cover us & them, but they had to have the own public liability to cover any incidents away from the office.

Hope this makes some sort of sense!

[Tutor Me]

I am presuming you are a Ltd company? In which case you need employers liability anyway. Even if you don't actually employ any one, it provides cover for any thing your company may do wrong. I have been through this with a broker as we used to take on self employed drivers, they would sub-contract for us on jobs. We had to have employers liability by law to cover us & them, but they had to have the own public liability to cover any incidents away from the office.

Hope this makes some sort of sense!

Hi,

Yes we are a Ltd company. So from what you say then it is a legal requirement even if you dont employ anyone? Is this across the board though or just certain industries as there are big differences in levels of risk depending on the industry? Could you recommend anyone?

[anthony15]

According to the broker we used who has never let us down it is a legal requirement, yes. I will PM you with contact details for the firm but they are called Petherwicks & are based in Hove on the south coast.

[Astaroth]

Public Liability insurance is not a legal requirement but can be highly recommended. National Insurance, Motor and Employers Liability are the only legally required insurances... others however can be made mandatory through contracts etc.

[Tutor Me]

Now I am confused. As we dont employ anyone it doesnt seem logical that we would be required to have "employee liability". I can see why it would be recommended to have public liability and that's something we are looking at. Am I correct in thinking then that:

1. We are not "legally required" to have public liability insurance
2. Only companies who actually employ people (rather than sub-contract individuals who are sign a contract which clearly states they are self employed) are "legally required" to have employee liability insurance.

Answers on a postcard! ;-)

[INDIZINE]

you dont need employee liability if you dont employ staff. outsourcing to s/e people is different.

A Ltd Co does not need ermployer liability if the only employee is the owner of that company or even a member of your immediate family.

[Astaroth]

PL wasnt legally required when I worked in insurance but there were plenty of contractual elements that could make it mandatory.

As Indizone says, EL is only required if your Ltd has direct employees excluding the owners/ immediate family. As others have warned though there is ongoing issues with what is a direct employee and what is an individual subby.