Subcontractors. Are Yours Covered?

Cleaning companies often use subcontractors instead of employed staff to help with costs and to have more flexibility to cover contracts. In theory, this should be a wise financial move unless, that is, the insurance for the subcontractor is inadequate which, in the event of a claim, could lead to costs far higher than the recruitment of an army of cleaners!

Bona Fide and Labour Only Subcontractors require a different set of insurance criteria for you as a cleaning company, so it is important that you know the main differences.

What is a bona fide subcontractor? 

If your subcontractor is bona fide, the following will often apply. They will have undertaken their own risk assessment, provided a method statement, and take responsibility for assessing the health and safety requirements of a contract. They provide their own tools and materials and may not need to take any direction from you. As such you will not be required to include them in your Public Liability insurance or Employers Liability insurance whilst they work on your contract. Any liability is their own and you are not accountable.

Checklist for bona fide subcontractors

  • Don’t need on-the-job instructions from you
  • You do not supervise them
  • They use own materials and tools
  • They have their own Public Liability/Employers Liability Insurance
  • They are responsible for their own Health and Safety
  • They provide their own method statement and are responsible for their own guarantees and maintenance

If these points apply to your subcontractor you do not need Public Liability or Employer Liability Insurance for them.

However, it is your responsibility to ensure that you have inspected all relevant documentation. If there is a loss to your business due to work undertaken by your bona fide subcontractors, you must be able to demonstrate to your insurers that you checked your subcontractor’s public liability cover and that it has either the same or a higher limit of indemnity than your own policy.

If you are unable to demonstrate this to their satisfaction they will not make any payment.

Fast Fact

Your own Public Liability policy will act as a contingency should your bona fide subcontractor’s policy fails. It is essential that you have adequate Public Liability insurance cover in place, as the contract is between you and the customer. For example, if something goes wrong, even if the fault was that of the bona fide subcontractor, the customer could sue you. They wouldn’t care that you had subcontracted the work.

If this happens, insurers could react in the following ways:

  • Pay the claimant then seek recompense from the subcontractor’s insurers
  • Pass the claim onto the subcontractor’s insurers

What is a labour only subcontractor?

Labour only subcontractors work under your direction and do not provide their own materials or tools. They are the same as PAYE employees, so you must include them in your employee numbers for the calculation of your Public and Employers Liability insurance premium, even if they are officially self-employed.

You are also under obligation to ensure that labour only subcontractors are protected under Health and Safety law, to the same extent as a PAYE employee, in which case, if there is an accident you can claim under your Employers Liability Insurance.

Checklist for labour only subcontractors

  • They are an individual or company supplying labour only
  • They take instruction from you
  • They work under your own method statement
  • They use materials and tools that are not their own
  • Covered by your Public Liability and Employer Liability Insurance
  • Full wages insured by you
  • They must comply with your Health and Safety policies
  • They are usually paid hourly and can be fired
  • There is no work guarantee and may leave part way through a contract

If these points apply, your responsibilities are far greater than when using bona fide subcontractors. It’s important to remember that an assessment for taxation and the assessment for whether the Employers Liability Act covers someone, are different. A labour only subcontractor may be responsible for their own tax, but you may be responsible for any injuries they sustain at work.

View Full Article

Share this news

Make a comment

    © Copyright 2018. Polished Insurance