top of page

Sandham Davies & Jones Ltd

Labour-only and Bona-fide Subcontractors

Understanding the differences between Labour-only and Bona-fide subcontractors will help ensure your insurance policy is set up on the correct basis.

 

One of the challenges of running a successful company is knowing what type of subcontractors you hire—specifically Labour-only or Bona-fide. Knowing the differences between these two classifications can help protect your business from costly and damaging risks, including fines, penalties, and possibly even insurance claims.

 

What are Labour-only Subcontractors?

 

Defining characteristics of labour-only subcontractors are as follows:
• They work under your supervision and direction.
• They use your materials, kit, equipment and tools.
• They comply with your health and safety policies.
• They do not offer guarantees for work done.
• They may leave part way through a project.

 

In essence, labour-only subcontractors are extra employees you hire to assist with work too large or complex for your full-time staff to handle in a timely manner.

 

As labour-only subcontractors are employed for the duration of any project, you are required to pay them the same wages as full-time staff and classify them as employees. Additionally, your firm must cover each labour-only subcontractor under your Employers’ Liability and Public Liability Insurance.

 

What are Bona-fide Subcontractors?

 

Defining characteristics of bona-fide subcontractors are as follows:
• They work under their own supervision and direction.
• They provide their own materials, kit, equipment and tools.
• They are responsible for their own health and safety.
• They may have additional employees.
• They write their their own Method Statements and are responsible for their own guarantees and maintenance.
• They will invoice you on job completion.

 

Essentially, bona-fide subcontractors are hired to complete a specific job—such as electrical work—on a project your full-time staff is not capable of completing unaided. As your firm hires them for a specific job, you pay them typically via invoice. Because they are working independently of your firm, bona-fide subcontractors should have their own insurance arrangements and these should be checked at outset.

 

What are the Risks of Confusing the Two?

 

Though both subcontractor types are similar, confusing the two can expose your firm to damaging risks. The most common risks include the following:
• A bona-fide subcontractor has insufficient or no insurance. As a result, after an incident, your firm would be liable even though the subcontractor was at fault.
• Your firm doesn't inform the insurance provider about hiring extra labour-only subcontractors, so they won't be covered under your Employers’ Liability or Public Liability insurance. As a result, if they're responsible for an incident or become injured or ill due to their work, you could be wholly accountable for the damages.

 

How Can I Protect My Business?

 

To ensure you are safeguarded against the risks of taking on subcontractors, adhere to the following best practices:


• Contact your broker or insurer to make certain your Employers’ Liability and Public Liability Insurance covers labour-only subcontractors.
• Confirm bona-fide contractors have their own public liability and employers’ liability insurance. You should also verify they have at least the same indemnity limit as your own firm, as you could potentially be liable to fill any gap.
• Annually review any bona-fide subcontractors’ public liability schedule to ensure you’ll be protected if they were to cause an incident whilst working for you.
• Let your broker know how much you intend to pay any bona-fide subcontractors, as it can lower the premium and contingent public liability for their actions still needs to be included

 

Determining Labour-only verses Bona-fide Status

 

If you answer yes to most or all of the following questions, the worker is probably labour-only:


• Are they paid hourly, weekly or monthly?
• Can they receive overtime or bonus pay?
• Do they work a fixed number of hours?
• Can they be directed when and where to carry out their work?
• Can they be re-directed from task to task?

 

If you can answer yes to most or all of the following questions, the worker is probably bona-fide:

 

• Are they on a fixed-price contract?
• Do they organize their own schedule?
• Do they decide independently how, when and where to do their work?
• Are they responsible for correcting unsatisfactory work?
• Do they work unsupervised?

 

If you need further information, please call us on 01633 213063 or email us using the box below.

 

Name*

Email*

Message*

SUBMIT

Required *

Sandham Davies & Jones Ltd

33 Bridge Street, Newport, NP20 4BH

Tel: 01633 213063 Web: www.sdandjones.co.uk

Company Registration Number 4607199, Authorised & Regulated by the FCA, Registration Number 229652

bottom of page