Labour-only Vs Bona-fide subcontractors – are you insured correctly?

Labour-only Vs Bona-fide subcontractors – are you insured correctly?
05 December 2017

Correctly identifying sub-contractors within your business can be complex, but because there are different risks of both labour-only and bona-fide subcontractors, it is vital to get it right. Knowledge of these two classifications and their differences can benefit you and help to protect you from costly and damaging risks, such as fines up to £2,500 from the HSE (Health and Safety Executive), penalties and non-payment of insurance claims. Consequences that could have been prevented.

So, how can you prevent your business from the whopping fines that no business wants to endure? Well…you learn about their differences.

Let’s give you a breakdown of who each subcontractor is and their differences:


Who are labour-only subcontractors?

Labour-only subcontractors are additional employees who you hire for a certain period of time, due to a project being too large and complex, or because you may be understaffed. They will work equivalent to full-time employees, with the only difference being that they are temporary, not permanent. Your organisation must cover each labour-only subcontractor under your employers’ liability and public liability insurance.

Here’s a simple breakdown… If you answer YES to the following it’s a labour-only subcontractor:

  • Is payment hourly, weekly or monthly?
  • Are they able to receive overtime or bonus pay?
  • Do they work a fixed number of hours?
  • Do they use your materials, tools and equipment?
  • Do they work under your supervision?


Who are bona-fide subcontractors?

Bona-fide subcontractors are similar to labour-only; however, there are a few crucial differences you need to be aware of. They will usually be employed to complete a certain project, such as plumbing or electrics, as your full-time staff do not have the necessary skills to complete such tasks. Now this is the important bit… because your firm is hiring them for a specific job, payment would be through an invoice. Also because they work independently, bona-fide subcontractors should have their own liability insurance.

Here’s a simple breakdown… If you answer YES to the following then you’re looking at a bona-fide subcontractor:

  •     Is payment on a fixed-price contract?
  •     Do they decide their own work schedule?
  •     Does the subcontractor decide on how, when and where to do their work?
  •     Do they have the responsibility for correcting unsatisfactory work?
  •     Do they work without supervision?


What if you confuse the two? What are the risks?

We know both are very similar, which is why we want you to fully understand the differences and their risks. The most common risks are:

If a bona-fide subcontractor hasn’t got employers’ liability or public liability insurance and an incident did occur, your business may be liable even if you’re not at fault. The best way to avoid this is to check that the bona-fide subcontractor has proven up to date insurance.

If you haven’t notified your insurance provider about hiring labour-only subcontractors then they may not be covered under your employers’ liability or public liability insurance. This is why communication is key. As a result of this, you may be accountable for damages if an incident occurs or if they become ill due to their work.


How can you avoid these risks?

  • Check that bona-fide subcontractors have their own liability insurance
  • Contact your insurance provider to check that your employers’ and public liability insurance covers subcontractors correctly
  • Review your bona-fide subcontractor’s schedule regularly to ensure they carry adequate insurance

If you have any questions or would simply like to speak to one of our team about your employers’ and public liability insurance, then please get in touch on 0208 458 9911