What’s the difference between a labour only subcontractor (LOSC) and a bona fide subcontractor (BFSC)?

And when you need employers’ liability insurance.

What is a labour only subcontractor?

Labour only subcontractors are usually hired to assist with a build project when extra help is required.

Labour only subcontractors become part of your team and work under your supervision, using tools, equipment and materials provided by your business.

As they are employed for the duration of the build project, you are required to pay them the same wages as your full-time staff. You become responsible for their health and safety while they are at work. This includes making sure you have employers’ liability insurance.

What is a bona fide subcontractor?

Bona fide subcontractors are hired to complete a specific job—such as plumbing or electrical work—on a build project that your full-time staff is not capable of completing on its own. As your firm would be hiring them for a specific job, you would pay them as if it were a normal separate job, typically via invoice. In addition, because they are working independently of your firm, bona fide subcontractors should have their own liability insurance and invoices will include VAT.

Do I need employers’ liability insurance for contractors?

Employers’ liability insurance covers you in the event that one of your employees is injured or becomes ill due to the work they do for you and decides to make a claim against you.

In the majority of cases, employers’ liability insurance is a legal requirement if you have employees, this includes employees who work for you on a short term basis.

An exception to this rule is that you don’t need employers’ liability insurance if you only hire independent, self-employed bona fide subcontractors. So, check the criteria above to ensure you’re working with bona fide and not labour only subcontractors.

You do need employers’ liability insurance if you hire labour only subcontractors, even if you only hire them to assist you with one project.

Have you got it right?

If you’re unsure about employer’s liability insurance and the differences between labour only subcontractors and bona fide subcontractors, speak to your broker today for peace of mind.