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Subcontractors – is there a gap in your insurance cover?

If you hire subcontractors – either on a regular or project specific basis, do you understand the difference between labour only and bona-fide subcontractors?

If you don’t, you could be at risk from costly and damaging fines, penalties or whopping claims.

Who are labour-only subcontractors?

Labour-only subcontractors are employees that you hire to assist with a project that is too large or complex for your full-time staff to handle in a timely manner. They:

  • Work under your supervision and direction
  • Use your materials, equipment and tools
  • Must comply with your health and safety policies
  • Don’t have a guarantee for work done
  • May leave part way through the job

As these subcontractors are employed for the duration of the project, you are required to pay them the same wages as your full-time staff and classify them as employees. You must cover each labour-only subcontractor under your employers’ liability and public liability insurance.

Who are bona-fide subcontractors (BFSC)?

Bona-fide subcontractors are hired to complete a specific job on a project that your full-time staff is not capable of completing on its own.They:

  • Work under their own supervision and direction
  • Provide their own materials, equipment and tools
  • Are responsible for their own health and safety
  • May have additional employees
  • Provide their own method statement and be responsible for their own guarantees and maintenance.

As independent employees working for you on a specific job, they would invoice you and must have their own liability insurance, which they should confirm in writing before they commence any work.

What are the risks of confusing the two?

Confusing the sub-contractor classifications can expose your business to costly and damaging risks.

The most common risks are:

  • Failing to notify NAPIT Insurance about hiring labour-only subcontractors. This would mean they were not covered under your employers’ liability or public liability insurance. As a result, if they were responsible for an incident or become injured or ill due to their work, you could be wholly accountable for the damages.
  • Hiring a BFSC that has insufficient or no employers’ liability or public liability insurance. As a result, in the event of an incident or accident, your company would be liable even though the subcontractor was at fault.

Insurance can be confusing – particularly when it comes to the finer details such as the use of subcontractors and additional labour. The NAPIT Insurance team is on hand to explain the details and help make sure you have the cover you need.

Talk to our friendly team to find out more.