Did you know that the average cost of an employment liability claim is $20,000 and up to 40% of management liability claims are employment risk related?
Employment risk is a critical consideration for any business that employs staff. Therefore, management liability insurance is a good starting point. In fact, there are many components to management liability insurance that serve to protect your business, including:
- Employment Practices
- Crime
- Defamation
- Directors and Officers
- Tax Audit
- Statutory Liability
Today we are looking at what’s commonly referred to as employment risk. Critically, employment risk generally falls within management liability insurance under the category of employment practices.
Thus, to help establish whether you need employment practices liability cover, our advisers ask critical questions to assess your employment liability risk, including:
- How does your business manage employment contracts with your staff and contractors?
- Do you outsource Human Resources (HR) requirements to HR consultants?
- Does your company have an internal human resources team or manager?
- Are you self-managing human resources?
Why should I consider employment issues as a business management risk?
In today’s litigious society, companies risk unhappy employees, former employees or a third party taking legal action against the company or its officers.
Furthermore, legal action can arise for several reasons, including unfair dismissal, discrimination, harassment, or other employment practices that may be deemed illegal or inappropriate.
Therefore, it’s vital to note that the threat of legal action on employment grounds is not exclusive to directly employed staff. For example, consultants, sub-contractors, and contractors engaged by your company may take legal action against your company on employment grounds.
How do I mitigate employment risk?
Keeping abreast of the changing rules and regulations regarding fair work and employment practices can be challenging – particularly if you self-manage employee relations.
A human resources specialist can help you develop the most appropriate policies and procedures to protect staff and your company. Specifically, they can help create a safe working environment that also protects staff attending external meetings or site visits outside your premises.
Nonetheless, you may wish to transfer some or all financial employment risks to insurance for complete peace of mind.
Case Study Example 1:
An employee of a hospitality venue wrote numerous negative comments about the venue and their fellow employees on a social media site. Consequently, the venue management dismissed the employee without notice after becoming aware of the comments.
Outcome:
In response to the immediate dismissal, the employee commenced unfair dismissal proceedings through the Fair Work Commission. Eventually, the case was settled, awarding the employee $26,000. Whilst the venue incurred legal defence costs of $17,000.
The total financial loss to the venue was $43,000.
Finally, with insurance, the venue can make a claim to help cover the direct financial loss and legal defence costs.
Case Study Example 2:
Three former plumbing contractors claimed specific site managers and supervisors were bullying, and they had suffered harassment. Secondly, they claimed the construction company failed to respond to their complaints. As a result, the plumbing contractors sought a combined compensation claim of $500,000.
Outcome:
After extended legal action, the construction company paid $95,000 to each plumbing contractor. Additionally, the company incurred over $120,000 in legal defence costs.
The total financial loss to the construction company was $405,000.
Importantly, with insurance, the construction company can make a claim to cover the direct financial loss and legal defence costs.
How can Clear Insurance help you with employment risk?
We use our extensive risk and insurance knowledge to help you navigate the full suite of management liability insurance products. In other words, we guide you through the pros and cons of each to help you choose the most appropriate insurance solution for your needs.
With our fee-for-service approach, you can feel confident that our fee is calculated based on the insurance services you receive rather than the policies themselves. Thus, reducing the taxes payable on your premiums.
Contact us today to see how we can help.
General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.
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