In today’s recruitment market, onboarding clients and signing contracts can become a bit of a revolving door. And if you don’t look close enough, you could unknowingly accept liability for risks that sit far outside your control.
From vicarious liability clauses to driver negligence agreements, seemingly minor contractual wording can create major financial consequences.
So, the question isn’t whether recruiters should accept the risk. It’s whether they understand the risks they’re accepting.
You spend hours vetting candidates and ensuring compliance – you should apply that same level of scrutiny to the contract clauses that could put you in the firing line if a client makes a claim.
A few clauses to look out for…
Indemnity clauses
Indemnity clauses can be part and parcel of recruitment-client contracts, transferring liability of a worker’s professional negligence to the recruiter.
If you’re not paying attention to liability clauses, you might assume you’re not responsible for contractor actions because you…
- Didn’t supervise the work
- Didn’t control the worker’s daily activities
- Had no power to actively prevent an incident
Yet, the contract wording will beg to differ – you could be held vicariously liable for mistakes, errors or omissions of a placed worker if they cause your client financial loss or reputational damage.
What you can do
Make sure the conditions of liability are reasonable and check if your business insurance can include a vicarious liability extension for your professional indemnity policy. That way, if you’re held liable for a contractor error, you could be covered for your obligations.
Drivers’ liability clause
For recruiters supplying workers for roles involving operating vehicles (like couriers or HGV drivers), drivers’ negligence is a big risk. Drivers’ liability clauses are similar to indemnity clauses in that they can transfer accountability to the recruiter/agency if a placed worker damages an end client’s vehicle.
The difference is that they specifically apply to the financial consequences of repairs to the vehicle itself (the third-party damage). The driver you placed will still stay liable for their own negligence in operating the vehicle or any third-party injury or property damage caused to anything that isn’t the vehicle.
What you can do
The most important thing is if you’ve contractually agreed to cover negligent damage to client vehicles, a drivers’ negligence agreement should also be in place outlining specific terms. You can also speak to your insurer and check if they offer drivers’ negligence cover as an extension to your public liability policy.
PSL terms
Some clients will only work with recruiters on their preferred supplier list (PSL), giving them a uniform way to deal with agencies. It means they can streamline their processes and use more ‘blanketed’ terms of businesses.
Unsuspecting recruiters can get caught out by PSL terms that can change lead times for payments, exclusions for third-party introduction fees or adjustments to power over rebates and refunds.
While not technically a singular ‘contract clause’ to look out for, PSL terms should be taken seriously if they’re part of the contract signing process.
What you can do
The best approach is due diligence, so you know exactly what you’re signing up for. Scan through any PSL terms presented to you and note anything that places unreasonable risk on your business. If you’re unsure about any terms presented to you as part of a contract, always seek professional legal advice.
Payment term clauses
Getting paid is business 101. So it’s crucial to scrutinise any payment terms in your contracts that can affect how (and when) you’re paid. The biggest red flags to look out for are:
- Extended payment periods (60, 90 or even 120-day terms)
- “Pay when paid” clauses
- Disputed invoice provisions
- Broad rebate or refund obligations
Extended payment terms, “pay when paid” provisions and broad rights to withhold or deduct payments can all put pressure on a recruiter’s cash flow. These clauses can leave agencies funding payroll and operating costs for longer, while also transferring the risk of late payment, non-payment or disputed invoices from the client to the recruiter.
What you can do
Always review payment terms carefully before signing and assess how they’ll affect your cash flow. Where possible, negotiate shorter payment periods, ensure any disputed invoice clauses only apply to genuinely contested amounts, and be wary of provisions that make your payment dependent on a third party. If terms seem unusually one-sided, seek legal or professional advice before agreeing to them.
Insurance requirements
Contracts for worker engagements will naturally include clauses related to what’s expected from the worker – including insurance requirements.
Many clients will specify the types of cover and minimum limits they expect contractors to hold, whether that’s professional indemnity, public liability or something more specialist like cyber liability.
The challenge for recruiters is that if a contractor doesn’t have the required cover and a problem later arises, the client may question whether you carried out the necessary checks in the first place. This is especially important where the contract requires the agency to verify a contractor’s insurance or keep evidence that appropriate cover was in place throughout the assignment.
What you can do
Before placing contractors, review any insurance obligations within the client contract. And don’t assume a contractor has the right cover in place just because they say they do. Make it part of your onboarding process to collect proof of insurance, check it meets the client’s requirements and keep an eye on renewal dates. A quick check at the start of an assignment could help you avoid a much bigger contractual headache later on if something goes wrong.
The point: don’t make any assumptions
The biggest contract risks for recruiters aren’t always hidden in the small print. They’re often sitting in plain sight, disguised as what you assume are standard terms and conditions.
The key is knowing what to look for. Whether it’s liability clauses, payment terms, insurance requirements or PSL agreements, spending a little extra time reviewing a contract before signing could help protect your revenue, reputation and avoid costly insurance claims in the long run.
Expert support that makes a difference
Understanding risks is one thing – managing them effectively is another. Kingsbridge Recruitment offers recruiters specialist insurance that reflects how they actually operate, backed by expert guidance to help them navigate their risk landscape with confidence.
With the right partner, insurance can be a practical safeguard, not a guessing game.
Speak to the Kingsbridge team – they’ll be more than happy to answer your questions.
Disclaimer: This article is written to provide general guidance and shouldn’t be treated as official legal advice. Always seek expert counsel regarding your business’ contracts and specific circumstances.
