Construction Business Owners – Knowing the difference between Labour only and Bona fide sub- contractors is essential when insuring your business
For many years there has been a grey area when it comes to construction firms correctly insuring the sub-contractors that work for them. There can often be confusion over whether the individuals should be covered by the insurance of your firm or by the business they work for. To ensure your cover is correctly arranged, and would respond to any claim, it is important to get this right.
On occasions you may employ additional individuals (or businesses) to assist with or carry out a particular part of a contract and although they may be classed as self-employed and even have their own Public Liability Insurance, should one of those individuals have an accident at work, you could find yourself and the company being liable to compensate the individual involved.
The question you need to be asking yourself is are these individuals working under your guidance and Health & Safety procedures and are they generally using your materials, equipment & tools? If the answer is yes, then these are Labour Only Sub-Contractors (LOSC) and must be classed as your own employees and your insurance company must be made aware of this.
If, on the other hand, you employ another individual or company for a specific job and they work without direction from you, provide their own materials & tools and are paid for the contract rather than by the hour then these would be classed as Bona-Fide Sub Contractors (BFSC) and would usually have their own Public & Employers Liability cover. This would then provide cover to the individuals that are performing the manual tasks, and should they have an accident on site a claim would be the responsibility of that Bona-Fide Subcontractor. Again, you would have to inform your Insurance Company that you employ Bona-Fide Sub Contractors and confirm that you check they have adequate insurances in place before they commence work for you.
What are the risks of confusing the two?
Even though both subcontractor classifications are similar, confusing the two can expose your firm to costly and damaging risks.
If a bona-fide subcontractor has insufficient or no Employers / Public liability cover in place, the claim may well fall back to you as you are the principal contractor, even if the incident was the fault of the subcontractor.
Similarly, if you have not informed your insurance provider that you hire Labour Only Sub-Contractors and they were to have an accident themselves or cause damage to a third party or their property again the Insurance Company could refuse to cover this and you could be wholly responsible for the damages.
How you can protect your business against these scenarios?
Call one of our specialists here at Drayton Insurance and we will guide you through this process. It is our job as your broker to ensure your business has the correct cover in place, giving you the peace of mind that your risks are fully protected.
Article by David McDonald, Senior Account ExecutiveBack to Latest News Get a Quote
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