Do Staffing Insurance Policies Cover Both Temp and Perm Placements?
The Critical Difference Between Temp and Perm Placement Risk
Staffing agencies often manage both temporary and permanent placements, but these two services carry vastly different risk profiles. A common misconception is that one insurance policy will cover both equally. Understanding this distinction is critical for protecting your agency, as the coverage you need depends entirely on who the employer of record is.
The Core Risk of Temporary Placements
When you place a temporary or contract employee, your agency remains the employer. This means you are responsible for their actions and their well-being. This requires robust coverage, including Workers' Compensation if they are injured, and General and Professional Liability for any damages or errors they may cause at the client's site.
The "Matchmaker" Risk of Permanent Placements
For permanent (or direct-hire) placements, your role is that of a "matchmaker." Once the client hires your candidate, they become the employer of record and assume responsibility for Workers' Comp and daily liability. Your primary risk shifts to your professional service: making the match. This is where Errors & Omissions (E&O) coverage becomes essential.
Why Errors & Omissions Is Critical for Direct Hires
E&O, or Professional Liability, for permanent placements specifically covers claims of "negligent hiring." For example, if you failed to conduct a proper background check or misrepresented a candidate's qualifications, your client could sue your agency for damages. This policy protects you from the financial fallout of an alleged error in your placement process.
The Danger of Mismatched Coverage
Using a policy designed only for permanent placements to cover a temporary worker is a massive gap. That policy likely has no Workers' Comp or General Liability for the placed employee. We've seen agencies face financial ruin from this simple mismatch. An insurance consultant can help ensure your policies align with your actual services.
Whether you focus on temporary staff, direct hires, or both, your staffing insurance must be tailored to your specific business model. A policy for temp placements is structured completely differently from one for perm placements. We at Wright Risk Consultants are experts in designing comprehensive insurance solutions for the staffing industry. Contact us to review your current policies or to build a plan that covers all your agency's operations.
