The Federation of Master Builders

Labour vs Bona fide subcontractors - to insure or not to insure?

Published date: 09 April 2018

Hiring a subcontractor is a standard part of the construction industry, and it’s not without its benefits. Working with subcontractors helps lighten workloads, offers more flexibility, and most importantly provides access to a new set of skills. But, with all that said hiring a subcontractor doesn’t come without risks, making it vital to be prepared and covered for all liabilities. However, deciding whether you need to insure subcontractors can be complicated, and there can be grey areas where labour only and bona fide contractors overlap. To help you, here’s a breakdown of everything you need to know.

Types of subcontractors

Firstly, you need to know who each subcontractor is and their differences:

Labour only subcontractors: A labour only subcontractor is similar to an employee, the only difference being they are temporary, not permanent. They work under your supervision using material, equipment and tools that you have provided. Most commonly, you determine their hours and direct where and how they work.

Bona Fide subcontractors: Bona fide subcontractors are more independent- setting their own hours, getting paid by invoice, working without supervision, and supplying their own tools, equipment and materials.

Contractor responsibilities:

Next, you need to understand who is liable for the work of subcontractors.

When hiring a subcontractor, both of you have duties under the health and safety law. Everyone needs to take the right precautions to reduce the risks of workplace dangers to employees and the public. By ensuring everyone you hire conforms to health and safety regulations, accidents and fines can be prevented.

It’s also important to note that your business could be liable for incidents caused by subcontractors, even if you’re not at fault. For example, if a bona fide subcontractor hasn’t got employers’ liability or public liability insurance and an incident did occur, you could be held liable for this mistake. There is no exception for labour only subcontractors. If an incident occurs or if they become ill due to the work, and they are not covered you may be held accountable for damages.

Even if you only have one employee you’re required by law to have an employers’ liability policy. As labour only subcontractors are legally considered as employees, they need to be covered by your employers’ liability policy. On the other hand, bona fide subcontractors who work under their own direction usually don’t need to be covered by your employers’ liability policy. But, that doesn’t mean they don’t need insurance, they simply should have their own public liability cover.

How can you avoid these risks?

Finally, the best way to avoid risks when hiring subcontractors is to do the following:

  • Check bona fide subcontractors have their own liability insurance, which is up to date and has the same level of cover as yourself.
  • Regularly review your bona fide subcontractor’s schedule to ensure they have adequate insurance.
  • Notify your insurance provider to check that your employers’ and public liability insurance covers subcontractors correctly.
  • Add labour only subcontractors to you employers’ liability policy.

Need advice?

If you have any questions about hiring a subcontractor or the insurance that you need to get started, our team of liability experts are always on hand to help. Just call 01353 652760 or email [email protected]


Keep in touch with FMB Insurance

For regular updates from FMB Insurance, sign-up here with your email address.