What is the difference between a labour only subcontractor (LOSC) and a bona fide subcontractor (BFSC)?
Read our guide to learn the difference between a labour only subcontractor and a bona fide subcontractor, and find out when you need employers' liability insurance.
- What is a labour only subcontractor?
- What is a bona fide subcontractor?
- Quick reference checklist
- Do I need employers' liability insurance for subcontractors?
What is a labour only subcontractor?
A labour only subcontractor (LOSC) is usually hired to work on a project when extra help is required. For example, if you are a building contractor, and you don't think you'll be able to complete construction on a house in time, you may need to hire some extra staff on a short term basis.
Labour only subcontractors become part of your team and work under your supervision, using tools, equipment and materials provided by your business. Typically, it's up to you to determine their working hours, their work location and their daily tasks.
Under UK law, a labour only subcontractor is an employee. Therefore, as the employer, you become responsible for the health and safety of your subcontractor while they are at work. This includes making sure you have employers' liability insurance in case something goes wrong.
What is a bona fide subcontractor?
A bona fide subcontractor (BFSC) is usually brought in, as part of a wider contract, to complete a specialist job that you or your employees don't have the necessary skills to complete. For example, if you are a building contractor constructing a new house, you may call upon plumbing, electrical or roofing specialists to carry out specific jobs.
Bona fide subcontractors will work independently, on a set task, without supervision or direction from you. They will also bring their own materials and tools to site. As they are hired for a specific job, payment would be made through an invoice or fixed price contract.
As self-employed professionals, bona-fide subcontractors should have their own liability insurance. You will need to check that any bona fide subcontractors contracted by you have public liability insurance with a limit of indemnity that isn't less than yours and that covers them for the work you've contracted them to do.
Quick reference checklist
Use our guide below to check whether you are working with a labour only or bona fide subcontractor.
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Bona fide subcontractor (BFSC) |
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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.
Still unsure if you need employers' liability insurance? Call us on 0345 303 1635 or speak to us on Live Chat.
You can read more about employers' liability insurance here.