Determining whether a contractor is Bona-Fide or Labour-Only can be tricky for many firms working in the construction industry. With employer’s liability being a legal requirement for contractors utilising the services of labour-only contractors, it is crucial that business owners know the difference.
Below we have provided a simple explanation of the key points to help ensure you know whether you’re working with Bona-Fide or Labour-Only Sub-Contractors.
What defines a Bona-Fide Sub-Contractor (BFSC)?
A BFSC will be called in to complete a specialist job within a larger contract that the main contractor or their team of employees aren’t sufficiently skilled to complete. For instance, a building contractor erecting a new house will potentially require a host of specialist contractors to tackle the: electrical, heating, plumbing and roofing elements of the project as well as other relatively complex tasks.
BFSCs:
- work without direct supervision from the main contractor on a set assignment.
- will supply their own tools and materials.
- Upon completion of an agreed task will be paid on the basis of an invoice following the terms of a fixed-priced contract.
- should have their own Liability Insurance as they are classed as self-employed.
The main contractor should verify that any BFSCs they utilise have Public Liability Insurance to a sufficient indemnity limit. This limit should be to the same, or in excess of, level of cover provided by the main contractors’ policy and be sufficient for the job that they’ve been contracted to complete. However, the main contractor is not required to have Employers’ Liability Insurance for BFSCs.
What defines a Labour-Only Sub-Contractor (LOSC)?
LOSCs:
- tend to be hired on a project when additional assistance is required. For instance, a building contractor might be struggling to complete a house build project to schedule. They will draft in further resources on a temporary basis.
- become part of another contractor’s team and work under their supervision. Tools and materials will be provided by the contractor overseeing the project.
- have their working hours, their place of work and daily workload determined for them.
- are determined as an employee of the main contractor by UK law and so the main contractor is responsible for the health and safety of the LOSC in the workplace.
- will need to be covered under the main contractor’s Employers’ Liability Insurance (even if the LOSC is only hired to assist with a single project.) in the event that a LOSC becomes ill or is injured as a result of the work they perform for them and decides to lodge a claim against the main contractor.
If you need Contractors’ Insurance and/or Employers’ Liability Insurance for LOSCs, speak to ProAktive on 01302 341 344 or 0114 243 9914.
By Sam Geddes Cert CII – SME Team Leader & Senior Account Handler