One of the most common questions we are asked, when discussing Liability Insurance quotes, is “what’s the difference between a Labour-Only and Bona-Fide Subcontractor?”. Hopefully, the following will give you a brief understanding on the differences, so that you can request the correct cover and/or complete your Year-End declarations accurately.

What is a Labour-Only Subcontractor?
For the purposes of UK law, a Labour-Only Subcontractor (LOSC) is a temporary employee (in exactly the same way as Seasonal Workers, Volunteers, Work Experience Students, and Apprentices). Normally, they do not provide their own materials and tools, and work under the direction of the Main Contractor (i.e. You).

Payments to, and ’employee numbers’ of, LOSCs will need to be factored into the Main Contractor’s Employer’s or Public Liability premium calculations. Please note that if you do not have Employers’ Liability cover in place, you will need to contact your Broker (or Insurer) before appointing such subcontractors.

What is a Bona-Fide Subcontractor?
A Bona-Fide Subcontractor (BFSC) will be those contractors who work under their own direction (rather than the direction of the Main Contractor, i.e. You), and will conduct their own risk assessments. Normally, the BFSC would be bringing their own tools and materials to the job, rather than having them provided by the Main Contractor. They should also have their own Public & Employer’s Liability insurance, and understand their legal liabilities in full.

You should be aware that you insurer will not cover any liabilities of the BFSC, and most insurance policies will have a condition, clause or exclusion requiring you to check that your BFSCs have the same level of Public Liability coverage as you, prior to appointing them. However, this does not mean your policy will not operate if the BFSC, through action or inaction, causes an event to occur that makes you legal liable.

There is no need for employees of the BFSC to be included in the Main Contractor’s Employer’s or Public Liability premium calculations, but your insurer may ask for an estiomate of the future annual payments to such subcontractors

How do You Tell the Difference?
If you are unsure, you should check with your insurer; but if you can answer “Yes” to one or more of the questions below, it’s more than likely they should be considered as a Labour-Only Subcontractor:

  • Do you pay the person hourly, weekly or monthly? (Bona-Fide subcontractors tend to be paid by invoice).
  • Do you pay the person overtime or bonuses?
  • Do you supply them with the materials and/or tools needed to perform the task at hand?
  • Can the Main Contractor direct them how, when, where and at what time they should do work?
  • Do they work a fixed number of hours?
  • Can the contractor reassign the Subcontractor to another task?
  • On the other hand, if you can answer “Yes” to the majority of the questions below they are more likely to be a Bona-Fide Subcontractor:

  • Are they on a fixed-price contract irrespective of what is needed to get the job done?
  • Are they on a service, rather than employment, contract?
  • Do they decide their own hours, how to do the job, when to do it and where to do it?
  • Do they work for other parties as well as the Main Contractor (i.e. you)?
  • Are they obliged to correct any quality deficiencies at their own expense and in their own time?
  • Can they provide evidence of their own Public Liability insurance?
  • Do they cover the costs of any materials, tools, etc. used on the job?
  • Are they able to hire additional labour if required at their own expense?
  • Are their earnings at risk if they have incorrectly priced the job?
  • If you are still unsure, please contact us to discuss.