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Labour-only Subcontractors vs. Bonafide Subcontractors

Account Executive Ed George takes a look at the differences between labour-only subcontractors and bonafide subcontractors and the implications for your business insurance.

What are labour-only subcontractors?

A labour-only subcontractor is a temporary employee who works under your instruction and direct supervision. 

As the name suggests, they only supply their labour to your business. You are responsible for supplying tools, materials and the appropriate personal protective equipment (PPE) in much the same as you would for your permanent employees. 

Do labour-only subcontractors need Public Liability Insurance?

No. Labour-only subcontractors are not responsible for arranging their own insurance because their actions are covered by your Public Liability Insurance

It’s important to note that they’re also able to make a claim against you under the Employer’s Liability section of your policy if they’re injured while working for you.

What is a bonafide subcontractor?

A bonafide subcontractor is an independent contractor, whom you employ to carry out a specific service. 

For example, a building contractor may employ a plumber or electrician to carry out specific aspects of a contract. They are responsible for providing their own tools and materials and carrying out the relevant risk assessments for the task you contracted them for. They are also responsible for their own employees and insurance. 

It is important to check that the subcontractor has a valid Liability Insurance policy that covers them for the activities that they are undertaking. This must meet the requirements of any conditions relating to the checking of bona fide contractors’ insurance within your own policy.

It should also include an ‘Indemnity to Principals’ clause. This protects the principal (often the end customer) by outlining that if a claim is paid, the beneficiary of the policy will not necessarily be the policyholder, but instead the third party who has suffered damage or injury.

In the event of a claim, your insurer will ask for a copy of the bonafide subcontractor’s insurance documentation. This will allow them to seek recovery of the claim from their subcontractor’s insurer. As such, you need to ensure you retain a copy of their insurance certificate. 

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How to differentiate between labour-only and bonafide subcontractors

There can be confusion as to what constitutes a labour-only subcontractor and bonafide subcontractor. Just because a subcontractor provides their own tools and materials does not always mean they are a bonafide subcontractor. 


Consider the master (employer) / servant (employee) relationship outlined by English law. The employer/employee relationship only arises when the tasks are performed by the employee under the direct supervision of the employer. Where this is the case, the subcontractor is classed as an employee (labour-only subcontractor), irrespective of who supplies the tools and materials. 

If you contracted them to carry out a task and it is up to them how the task is completed, they are likely to be a bonafide subcontractor.

Why does it matter?

It is important that you declare your use of subcontractors carefully and correctly because failure to make a fair presentation of your business could invalidate your insurance in the event of a claim. 

If you’re ever in any doubt about whether a subcontractor is labour-only or bonafide, speak to your insurance broker straightaway. 

Want to know more?

Speak to Ed George on 01223 949027.

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