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Correctly classifying subcontractors in your business is a crucial part of understanding your legal requirements and liability. There are also different insurance requirements for the different types of subcontractor, which we will hopefully be able to clarify for you in this blog.

Labour-Only Subcontractors

Labour-only subcontractors are essentially employees who are taken on in order to act as additional labour.

In this scenario, you would normally provide any tools and materials necessary for the work, instruct them where to work and what to do, provide them with health and safety training, pay them an hourly or daily wage and supervise them to ensure their work meets your standards.

You will be considered liable for labour-only subcontractors in the same way as a direct employee. They should therefore be included on your insurance as if they were employees. They may well consider themselves to be self-employed and have Public Liability insurance in their own name, but once they are working under your instruction they become your responsibility from a Public and Employers’ Liability perspective.

Failure to therefore insure labour-only subcontractors properly could result in problems with your insurance policy and even an HSE (Health and Safety Executive) penalty.

Bona-Fide Subcontractors

Bona-fide subcontractors on the other hand work under their own supervision and direction, using their own tools, often brought in to undertake work which cannot be done directly.

They have the responsibility to decide how, when and where to work and would be paid once the work is completed. Bona-fide subcontractors would therefore be responsible for their own insurance.

Most Public Liability policies will include cover for Bona-fide subcontractors as a standard extension, subject to annual payments not exceeding a percentage of turnover and a requirement that you keep a record of their Public Liability insurance. In some cases you may also need to ensure that the bona-fide subcontractors have a limit of Public Liability insurance which is no less than the limit on your policy.

If you have any questions, or wish to arrange insurance for your business, please give us a call on 020 3883 7976 or, alternatively, why not use our online quote generator?