Subcontractors

Bona fide and Labour only sub contractors?

HETAS Insurance Subcontractors articleIf you regularly use contractors it’s important that you are aware of the type of subcontractors you are hiring – specifically labour only or bona fide?  Not understanding the difference between these two types of contractors can put your business at risk from fines, penalties or claims.

Labour only subcontractors

  • Work under your supervision and direction
  • Use your material, kit, equipment and tools
  • Comply with health and safety policies
  • Do not have a guarantee for work completed
  • May leave part way through the job

Bona-fide subcontractors

  • Work under their own supervision and direction.
  • Provide their own materials, kit, equipment and tools.
  • Are responsible for their own health and safety.
  • May have additional employees.
  • Are responsible for their own guarantees and maintenance.

So, why does it matter?

These key differences can be very important when it comes to insurance. Labour only subcontractors are treated as direct employees so need to be included in your employers’ and public liability policies. Bona fide subcontractors are not classed as employees and do not need to be included under your employers’ liability insurance as they should have their own insurance.

Even though both subcontractor classifications are similar, confusing the two can expose your firm to costly and damaging risks. The most common risks include the following:

  • A bona-fide subcontractor has insufficient or no employers’ liability or public liability insurance. As a result, after an incident, your firm is liable even though the subcontractor was at fault.
  • Your firm had not notified your broker / insurer about hiring labour-only subcontractors so they were not covered under your employers’ liability or public liability insurance. As a result, if they were responsible for an incident or become injured or ill due to their work, you could be wholly accountable for the damages.

How can you protect your business?

To guarantee that you are safeguarded against the potential risks that can arise from taking on subcontractors, review the following best practices:

  • Contact your broker / insurer to ensure that your employers’ liability and public liability insurance covers labour-only subcontractors.
  • Confirm that bona-fide contractors have their own public liability and employers’ liability insurance. Even if they are insured, you should verify that they have at least the same indemnity limit as your firm, as you could potentially be liable to fill the gap.
  • Annually review your bona-fide subcontractors’ public liability schedule to ensure that you’ll be protected if they were to cause an incident while working for you.

If you have any questions or queries regarding your business insurance, why not get in touch with HETAS Insurance.

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HETAS Insurance Services is a trading name of Jelf Insurance Brokers Ltd which is authorised and regulated by the Financial Conduct Authority (FCA). Not all products and services offered are regulated by the FCA.  Registered in England and Wales number 0837227. Registered Office: Hillside Court, Bowling Hill, Chipping Sodbury, BS37 6JX. FP18.711

Source: Zywave Risk Insights Construction 2017


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