Top tips when considering outsourcing your work: risky or reward?
Is there a risk in outsourcing work overseas? It saves me money so why wouldn’t one consider?
Like everything in business, you need to do your homework in order to see how a new process or plan will affect your business, it's bottom line, and of course the insurance!
How can different outsourcing arrangements affect insurance?
This article is all about Outsourcing and its potential risks.
When it comes to outsourcing there are two main options you can consider:
- Platforms where they find you the right person for the job and you then engage with them directly
- Platforms where you access the time of their staff and you pay that company the agreed hourly rate or other set parameter agreed upon, for the time they spend on your work
To date, the second option, as long as they are insured for what their staff are offering by way of services, should not raise too many concerns for you. The first option however can open up a can of worms!
You will need to consider the following if you wish to engage with someone overseas:
Location location location – where are they located in the world and will your particular insurance policy cover them?
Who is to provide insurance cover – If they arrange their own insurance this is much easier
Employment terms – be careful in your wording especially around waiving rights to subrogate
The geographical limits under many policies do differ from Australia wide to Anywhere in the World (excluding US and Canada). So this is one item you need to consider. Some countries however, for insurance to be effective, must be obtained from within their own country, from an Insurer who has an office there. So even if your policy does state worldwide, it may not be relevant in some countries. This would become apparent when talking to the Insurer initially. This is one reason why it is easier for them to arrange as opposed to you!
One must be careful with the wording of an employment or subcontractor agreement that one arranges with outsourcing staff. Many Professional Indemnity policies include a clause in respect to subrogation which generally states that without the Insurer’s consent, you cannot enter into any agreement which excludes or limits their right of recovery of any losses by that party. So, this would mean that if the outsourced party is responsible for the loss, the Insurer will want to seek recovery for any payments made to settle the claim. Therefore, once again, it is most beneficial for them to have their own insurance policy to then cover this action.
So whilst it can save you time and potentially money, it is very important to seek out the insurance arrangements before committing. Having a discussion with your insurance provider (or broker) can confirm whether cover will be provided and to what end.
Reminder, insurance is a great risk treatment however you still need to ensure you fully disclose your business activities and the use of subcontractors. Anything that may be a little outside the box, it is best to disclose so then you can rest assured you have the right protection in place.
If you would like to discuss your insurance and outsourcing arrangements, get in touch with us at My Insurance Kit and we can work through together.
Disclaimer: The information provided above is for general information purposes only, and it is not a substitute for professional advice. You should always consider the PDS/Policy wording before making a decision. Coverage may differ based on specific clauses in individual policies. Refer to the FSG for our services and remuneration details.