When getting business insurance an important thing to know is the difference between labour only subcontractors and bona-fide subcontractors. There is quite a simple difference but getting it wrong could mean either paying for subcontractors insurance that may not be necessary or not having the correct insurance in place which could mean you are breaking the law. Here’s a brief explanation to help you.
Labour only subcontractors
Sub-contractors that are employed as “labour only” work under your supervision and direction, and use your materials, tools, etc. A contractor would normally take on labour only subcontractors to assist with a job that requires extra employees. The sub contractor is paid wages by the main contractor and is classed as an employee. Employers liability insurance is therefore required by law for each of these people.
Sub-contractors that are used as “bona-fide” work under their own supervision and direction, and provide their own materials, tools, etc. A contractor would normally take on bona fide subcontractors to perform a particular job within his larger contract that he is not able to do (i.e. a building contractor constructing a new house may call upon a plumbing contractor to do all the plumbing in the new home that he is building). The sub contractor is paid by the main contractor as if it was a normal separate job for a customer. The sub contractor should have their own liability insurance in place but it is vital that the main contractor checks this for their own protection.