Top five risks facing recruiters in 2021

As the world of recruitment continues to be affected by a growing number of issues, both new and old, our expert in the recruitment insurance field, Peter Stoll, takes an in-depth look at the main challenges facing the industry in 2021.

1. Brexit

Although the UK’s decision to leave the EU was taken four and a half years ago, the trade deal with the EU was only finalised in the last few hours of 2020. The document outlining the deal runs into almost 2000 pages and will certainly present opportunities for some exporters, but will also likely create challenges, with more bureaucracy, particularly regarding the new points based immigration system.¹

In 2019, the UK workforce was made up of around 8% of EU nationals², the impact on the recruitment sector is very self-evident. Free movement of workers will stop, from 1st Jan 2021 EU citizens moving to the UK to work will be required to obtain a visa in advance.³

This will undoubtedly create a talent shortage, while UK workers are retrained to replace their EU counterparts. This may however create opportunities for recruiters to offer training courses for workers.

Qualifications once routinely accepted across EU member states, will now no longer be valid and this may create a barrier to workers’ ability to secure jobs around Europe. HGV drivers, whose driver licences and qualifications were previously accepted in the UK, will now require more investigation from UK recruiters before they can be supplied. This will impact on insurances such as drivers’ negligence, where insurers insist on licences being checked and only those with a good conviction record will be covered by the policy. Obtaining insurances for European domiciled subsidiaries will need to be looked at more carefully.

In the post-Brexit era EU, domiciled businesses will have to be insured in the country of domicile, and may be subject to local insurance requirements.

Our advice: Check that your professional indemnity policy covers all aspects relating to Brexit and immigration matters, and check the cover carefully for EU based businesses.

2. IR35, April 2021

After the delayed implementation of the new IR35 rules in the private sector in 2020, we believe that the new rules will be coming into force on 6th April 2021. This of course is subject to any potential changes resulting from the extension of the COVID lockdown in January, and the extension of the furlough scheme to the end of March 2021.

Most recruiters will be well versed with the changes following the extensive education process in the winter of 2019/20. If the worker is supplying their services via a Personal Service Company (PSC), then a tax status assessment may be required to identify whether they are inside or outside IR35.

The outcome will determine if tax and national insurance needs to be deducted at source or payments are made gross to the contractor. The recruiter and the hirers are potentially liable for any unpaid tax.

Our advice: Make sure that the status test is undertaken by a reliable source, and work closely with the hirers to ensure that all parties are aware of the status of the worker. Insurance is available for both the investigation costs and potential liability.

3. Cyber and Data Liability

On the back of the introduction of GDPR and the recent boom of people working from home as a result of COVID-19, a number of agencies will be facing an increased risk of a cyber-attack, with potentially damaging effects on the business. Many hirers are insisting that losses incurred as a result of the supply of a worker are covered by the agency through their insurance, although this may be more of a professional indemnity risk, rather than a cyber liability.

It would be a good exercise to assess the risks and potential outcomes of an attack or loss of data to see if an insurance policy would be beneficial to your business. A cyber insurance policy can provide cover for damage to the IT system, cost of replacing the data, business interruption, cyber extortion, mitigation costs regarding negative publicity following an attack, and social engineering (also known as fraudulent impersonation).

The damage to the business could be substantial and dealing with the ICO could be challenging, but doing nothing after an attack is not an option.

Our advice: Carry out a full risk assessment with your IT team or supplier, and consider the potential damage and fines if you get it badly wrong. Look at the cost and protection offered from a cyber insurance policy.

4. COVID-19

The recent and ongoing COVID -19 pandemic is creating huge risks for employers, who may see a big rise in employment claims once the furlough scheme ends in March 2021. This is as a result of employees feeling that their redundancies could have been avoided, and may bring claims for unfair dismissal, discrimination, or constructive dismissal.

The HMRC will be carrying out checks on businesses that have utilised the furlough scheme.⁴  Some businesses may then be subject to wider investigation, and could face fines and penalties and repayment of large amounts to the HMRC.

Our advice: Get good legal representation and employment legal advice, or purchase legal expenses insurance. The costs and availability of employment practices liability insurance have been affected by COVID-19 and general hardening of the insurance market.⁵  With regards to tax issues, such as tax investigation undertaken by the HMRC, costs associated with this may also be covered under the legal expenses policy, but it is vital to obtain tax advice.

5. Employment Liability risks and mental wellbeing of home workers

Not immediately apparent as a result of COVID, but with the majority of workers operating from home, sometimes in isolation, there may be a rise in claims from employees who feel that their mental wellbeing has been compromised. This being as a result of their employers not providing suitable support whilst working remotely. Something further exacerbated by lockdown conditions and additional childcare pressures for many.

It is therefore essential that a good process of support is put in place. One that can be evidenced in the event of a worker claiming under the Employment Liability policy. If you do provide mental wellbeing support, then it must be offered and documented. It is helpful if the employee demonstrates their understanding and agreement of the process, to avoid any allegations of breach of duty of care by the employer.

Our advice: Speak to insurers to ensure that your business policy covers such claims, and if any HR advice is required, then whether this is available to you from risk management and HR specialists.

Be sure to engage with your broker regarding any recruitment insurance queries you may have, if you are unsure that the cover you have in place is suitable for your needs.

 

^Sources: 

<sup>1. https://www.gov.uk/government/publications/uk-points-based-immigration-system-employer-information/the-uks-points-based-immigration-system-an-introduction-for-employers
2. https://migrationobservatory.ox.ac.uk/resources/briefings/eu-migration-to-and-from-the-uk/
3, https://www.gov.uk/guidance/employing-eu-citizens-in-the-uk
4. https://eebs.co.uk/how-hmrc-will-audit-the-coronavirus-job-retention-scheme/
5. https://www.iamagazine.com/markets/current-and-upcoming-trends-impacting-the-employment-practices-market</sup>

 

<sup>The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.

Statements concerning legal, tax or accounting matters should be understood to be general observations based solely on our experience as insurance brokers and risk consultants and should not be relied upon as legal, tax or accounting advice, which we are not authorised to provide.</sup>