Using Sub-Contractors
Help Sheet

Abbott
Insurance

The same rules apply in the construction industry as in any other industry to determine whether a worker is an employee or self-employed. However, there are special difficulties in the construction industry because labour-only subcontractors are often short-term or casual workers, and there is often confusion about whether holding a subcontractor's tax certificate or registration card means that a worker is self-employed.

Common indicators of employment

• The contractor has the right to control what the worker has to do - where, when and how it is done - even if the contractor rarely uses that control.
• The worker supplies only his or her own small tools.
• The worker does not risk his or her own money and there is no possibility that he or she will suffer a financial loss.
• The worker has no business organisation, for example yard, stock, materials, or workers.
• The worker is paid by the hour, day, week or month.

Common indicators of self-employment

• Within an overall deadline, the worker has the right to decide how and when the work will be done.
• The worker supplies materials, plant or heavy equipment needed for the job.
• The worker bids for a job and will bear the additional cost if his or her bid is too low.
• The worker has a right to hire other people who answer to him or her and are paid by him or her to do the job.
• The worker is paid an agreed amount for the job regardless of how long it takes.

PAYE Employees

The contractor pays these people on a regular basis and is responsible for collecting the income tax and national insurance. These employees are counted in the considerations for public and employers liability. Directors of limited companies are treated as employees. It is a legal requirement to have employers liability insurance for these people.

Labour Only

Labour only sub-contractors are treated as employees. They work under the direction of the main contractor and work with material supplied by the contractor. They are typically paid by the hour for all work done, rather than for fixed contract price. These employees are counted in the considerations for public and employers liability. Some insurers include, free of charge, cover for very low volume of temporary labour-only sub-contractors.

Bona-Fide Sub-Contractors

Bona-fide sub-contractors do not work under the direction of the main contractor. They supply their own material and are responsible for their own insurance. They work to contracted price, not by the hour. They will carry the responsibility for the cost, timing, quality and completion of the job. It is good practice for the main contractor to ensure that the BFSC has insurance. BFSC may in turn hire their own employees, labour-only contractors or other bona-fide sub-contractors. Businesses that depend wholly on BFSC are difficult to insure.

Full details of what is, and is not, covered will be explained during the pre-commitment phase of arranging insurance.

The field of General Insurance is detailed, complex and subject to many regulations. Due to the rapidly changing nature of this business, the information presented through this Help Sheet should only be used as a guide.

Whilst we take care to ensure the quality of the information presented, the Help Sheet is presented without warranty or obligation.

For full and up-to-date advice, please contact our experts.

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