Among the policies you will need is employers’ liability insurance, for both your permanent employees and relevant contractors. However, you must be aware of the differences between types of contractor, and ensure your policy covers all workers that require it.
A contractor can be:
There is also special scheme for self-employed contractors and sub-contractors working in the construction industry, called the Construction Industry Scheme (CIS).
There are two types of subcontractors, both with different requirements under employers' liability insurance. These are bona fide subcontractor and labour only subcontractors.
A bona fide subcontractor should be working under his or her own direction, use his or her own tools and materials, have his or her own liability insurance and understand his or her legal liabilities.
In this case, there is no need for employees of the bona fide subcontractor to be included in employers' liability or public liability premium calculations. However, just because a subcontractor has their own insurance, this does not automatically mean they are bona fide. To guarantee that they are, they must assume full responsibility for the entire project, including risk assessments, method statements, and health and safety aspects of the contract.
Most liability insurance policies require you confirm your bona fide subcontractors have equivalent level of public liability insurance as you. You should therefore ensure this is absolutely clear in a written contract with your bona fide subcontractor.
Labour only subcontractors work fully under the direction of the contractor. They are provided the materials to work with; given detailed instructions of what to do, and then supervised; and have to comply with health and safety arranged for them.
Under UK law, if you use a labour only subcontractor they count as your employee, and you as their employer take on the full risk of public, product and employers' liability. They must therefore be included in your employee insurance calculations even if they hold their own separate insurance policy, as this will not be valid under the terms of the work you have employed them for.
It is likely they are a bona fide subcontractor if:
It is likely you employ a labour only subcontractor if:
It is crucial to ensure you have the right employer’s liability insurance to cover the right subcontractors. Even if you hire a non-PAYE worker, you should still double-check, as while PAYE is regulated by HMRC, employers’ liability insurance is regulated by the HSE. Therefore, a worker can be not classed as an employee for PAYE purpose, but be classed as an employee for employment law.
For more information on status of workers, see the UK government’s rules on employment status.
With Towergate’s employers' liability policies, labour only subcontractors are automatically covered in the same way as direct PAYE staff. However, while we can cover both types of employees for the same risks, it is very important to be aware of and to declare how your workforce are employed, as this will affect how your risks are calculated.
We offer specialist employers’ liability insurance tailored to your business’s needs. Contact our tradesman insurance team today for a quote on 0344 346 0409 or enquire online.
Alison Wild BCom (Hons), MAAT, ATT, Taxation Technician is a highly respected industry professional who has been working with and advising SMEs in areas including tax, pensions, insurance and marketing for over 25 years. She is a member of the Association of Accounting Technicians (AAT) and Association of Tax Technicians (AAT) and also has considerable experience as a residential landlord.
Date: November 15, 2017
Category: Small Business