There is no legal definition of different types of self-employed persons but it is essential to correctly determine the status of sub-contractors to ensure the correct insurance cover is in place.
If a sub-contractor is a bona-fide sub-contractor (BFSC), Employers’ Liability Insurance is not required but if a sub-contractor is a labour only sub-contractors (LOSC), Employers’ Liability Insurance is required. However, a main contractor still requires contingency public liability cover for the acts of BFSC and needs to have a system in place to ensure that the BFSC does indeed have their own cover.
Hopefully the following guide will make the decision-making process easier and help employing contractors:
Labour Only Sub-contractors and the self-employed
Labour only sub-contractors, self-employed people or other persons hired or borrowed by you are considered employees if they are working for you and are under your control.
Other contractors who are not Employees i.e. bona-fide sub-contractors – (BFSC)
If subbies are not working directly for you and not under your control and they have their own insurance cover.
Questions to ask
If the answer is ‘Yes’ to all or most of the following questions, then the contractor is probably a LOSC and would need to be covered for Employers’ Liability Insurance:
- Do they work a set number of hours and are they paid a set hourly, weekly, or monthly rate?
- Can they earn overtime or bonus payments?
- Do they always have to carry out the work themselves?
- Can the Principal tell them at any time what to do, where or when to carry out the work or how to do it?
- Can they be moved them from job to job?
- Does the principal complete the risk assessments?
However, if the answer is ‘Yes’ to all or most of the following questions then the worker is probably BFSC and Employers’ Liability Insurance for these sub-contractors would not required
- Is a fixed price agreed for a job regardless of how long the contract may take?
- Is there a contract for service as opposed to a contract of employment?
- Within an overall deadline, does the contractor decide what work to do, how and when to do the work and where to provide the services?
- Do they regularly work for other principals as well as you?
- Does unsatisfactory work have to be rectified in their own time and at their own expense?
- Do they hold their own liability insurance in their own name?
- Do they pay the cost of all materials or supplies required for the work without being reimbursed? (Excluding minor items and consumables).
- Can they sub contract the work to someone else or engage helpers at their own expense?
- Do they provide or hire in the main items of equipment they need to do their job, not just the small tools that many employees provide for themselves?
Insurance is a necessity but the correct insurance is essential. When this comes to contracting risks, there are frequent examples of poor cover as a result of a lack of understanding. Under the Insurance Act 2015, if wrong information is disclosed, it is likely that at the time of a claim, an insurer may not pay because of the misrepresentation.
The next time you look to obtain a new quotation bear in mind that a professional will ask many probing questions to find out as much about your business as possible.