Small to medium-sized recruitment firms could see their insurance premiums soar in the coming years as the cost of employers’ liability insurance increases.

Insurers are predicting double-digit rises in the cost of employers’ liability insurance for years to come. Earlier this year, the Federation of Small Businesses found that one in five companies had experienced a doubling of premiums this year.

Having some form of liability cover is a statutory requirement for any business which employs staff.

Premiums have increased at a hearty pace as an increasing number of employees seek compensation for illness and injury at work and, in rare cases, corporate manslaughter.

The situation is particularly complicated for recruitment firms because the status of temporary workers is still ill-defined.

Employment tribunals have so far been divided on whether temps in compensation cases can be classified as employees of the client or the agency. This is something which agencies should consider carefully when negotiating terms of business with clients, advises Robin Kirkland, managing director of Dallas Kirkland, which specialises in insurance products for the recruitment industry.

He claims recruitment agencies’ premiums could rise significantly if they allow their clients to pass on certain responsibilities for temps to them.