Outsourcing HR to HR consultancies

Outsourced HR provision

AS an SME, do you outsource your HR to a third party?

It is very common for businesses to outsource their HR requirements to a third party HR consultancy firm. This is a perfectly sensible thing to do. One thing that is worth remembering is that if you are handling a tricky HR issue you may take advice, you many follow advice yet you may still find yourself in an Employment Tribunal defending a claim by an employee (or ex – employee).

So the risk is reduced by taking HR advice but it is not removed.

So one extra layer of protection when you are looking to engage an HR advisor is to question them on whether you will get the benefit of their employment insurance if you engage them.

They may be able to easily provide this to you or you might find that they are unable to offer you this. Then its worth deciding if you are comfortable partnering with the advisor without this cover in place. You may well still decide to proceed, but at least you have made an informed choice based on what is available.

As an outsourced provider of HR, what insurance is relevant to your clients?

If you are an HR provider, you may find that larger HR providers are winning business from you because they are also able to offer their clients insurance protection. Faced with two similar offerings – and one includes the extra layer of protection that Employment Dispute insurance and one which does not…its not a difficult choice to make.

You only really discover how good your insurance cover is when you need to make a claim…

However, it worth reading the wording as some policies may contain awkward clauses that could leave you or your clients with inadequate protection.

One such clause is where an insurer may only be prepared to defend a claim if they believe there’s a high probability they will be successful.

Mostly insurers are not there to be unreasonable but having a clause which gives them the option to be unreasonable if they want to be, is clearly best avoided.

Another thing to look at is what happens to your client if your advice is not followed and there is a claim. Do they have any cover?

What if they follow your advice and there is a claim nonetheless. Would your client have to contribute to it?

What covers are needed?

The core elements include cover against claims relating to:

• Wrongful dismissal
• Termination of employment (either actual or constructive)
• Employment related misrepresentation
• Unfair dismissal
• Unequal pay
• Unlawful deduction of wages
• Discrimination on the grounds of sex, pregnancy, disability, age, race, religion
• Sexual or other harassment or employment related humiliation
• Invasion of privacy
• Wrongful discipline
• Failure to adopt adequate employment or workplace policies
• Victimisation
• Wrongful deprivation of any career opportunity
• Cover responds to existing, past and potential employees

What’s not covered?

This kind of insurance will general not cover the following situations:
• any claim or circumstance you and/or your client were (or should have) been aware of prior to inception. Cover can sometimes be found for this but it tends to fall under a different class of insurance. This is called ‘After the Event’ insurance. Because the event has already happened.
• any claim arising from dishonesty.

If you would like to know more about the type of employment protection available or receive some impartial advice about insurance options for the HR sector, we’d be more than happy to help. Just contact zahid@custodianinsurance.co.uk or call 0207 648 4343.