What is the difference between a bonafide and labour only subcontractor?

  Simonx   |   27th March 2014 - 4 min read

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We’ve been asked this question a few times recently and we thought we’d provide the answer on our blog so that it can help others stuck with this area too.

What is a Bona-Fide Subcontractor (BFSC)?

A Bona-fide subcontractor will normally be a contractor who works under their own direction (rather than the direction of the insured part), they will usually have their own insurance in place and should be bringing their own tools and materials to the job rather than having them provided by the contractor.

  • A bona-fide subcontractor must not be working under the direction of the contractor. They should have their own insurance and understand their legal liabilities in full. If this is true there is no need for employees of the bona-fide subcontractor to be included in employer’s liability or public liability premium calculations.
  • This does not mean that if a bona-fide subcontractor’s actions cause you to be legally liable for something that you are not insured. Your insurance will cover any liabilities against you even if they are produced by another party.
  • However, you should be aware that you insurer will not offer coverage for any liability of the bona-fide subcontractor. That bona-fide subcontractor should have their own insurer cover this liability.
  • Most insurance policies require that you check that your bona-fide subcontractors have the same level of public liability coverage as you do prior to engaging them.

What is a Labour Only Sub-Contractor (LOSC)?

For the purposes of UK labour law; a labour-only sub-contractor is an employee. They do not provide their own materials and tools normally. They work under the direction of the contractor. They will need to be factored into your insurance calculations as employees as typically they will not provide their own insurance coverage.

How do You Tell the Difference Between the Two?

You should check with your insurer if you are unsure but if you can answer yes to several of the questions below; it’s more likely they are a labour-only sub-contractor rather than a bona-fide 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 majority of their tools?
  • Do they do all the work required of them, themselves?
  • 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 them to another task?

On the other hand if you can answer yes to the majority of these questions they are more likely to be a bone-fide sub-contractor:

  • 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?
  • Are they obliged to correct any quality deficiencies at their own expense and in their own time?
  • Do they have public liability insurance that they can provide evidence of?
  • 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?
Subcontractors Insurance

Simon Cowling

Simon spent over 10 years programming from behind a keyboard, before transitioning across to management. A keen adrenaline junkie, whether that involves going up the mountain or over the edge of the cliff. He learned his management skills not just in the I.T world but also running youth camps and conferences, helping teenagers find a footing in life. He also really likes pie.

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