A passion for what you do is often all that’s needed to start a successful SME business. But once it’s got customers, employees and regulators, it’s also essential to have access to legal support.
SMEs can face all manner of legal issues, from actions relating to owning or leasing property through to tax investigations and regulatory action. However, for Tom Pye, ancillaries product manager at Simply Business, one of the main areas of concern is employment law.
“These businesses won’t necessarily have an HR function or any experience in hiring and firing staff so they can easily find themselves facing a dispute from a disgruntled employee,” he says.
“It can be incredibly stressful dealing with this and really distract them from their business.”
Dealing with a legal dispute can also be incredibly costly. On top of the cost of legal advice, and the time involved getting this, there is also the possibility of reputational damage as a result of the dispute.
Given this, legal expenses insurance is regarded as a must for SMEs. This covers legal costs incurred defending a claim for areas including employment, property and tax disputes. Many policies also provide access to crisis management, sending in a public relations professional to help minimise the reputational damage after a loss or accident.
Even where an SME is fortunate enough not to run into any legal action, this cover can still be invaluable. Kevin Hawkins, head of commercial property and liability underwriting at LV Broker, explains: “These policies include a helpline to enable an SME to check any legal issues that arise. Areas such as employment law and health and safety are always changing so it’s reassuring to know the experts are only a phone call away.”
Many policies will also include access to libraries of legal documentation, enabling SMEs to source the correct paperwork, whether they’re hiring a member of staff or setting up a new contract with a supplier.
But, while cover is comprehensive, brokers also have an important role to play in helping their SME clients understand how it works if a legal dispute does arise.
Jonathan Till, account executive at Swinton Insurance, explains: ” Once a potential dispute arises, it’s crucial that the business speaks to their broker or insurer as soon as possible. Sometimes they will try to resolve it themselves but this can prejudice their position, potentially resulting in the insurer declining indemnity.”
Supporting SMEs with a low-cost legal expenses policy, and advice on how to get the most out of it, will help to reduce these risks and enable them to concentrate on running their business.