What is the difference between a labour-only sub-contractor and a bona fide sub-contractor?

By Christopher Oakley, Commercial Account Executive.

Does your business work with labour-only subcontractors (LOSC) or bona fide sub-contractors (BFSC)? It's important to understand the difference between these terms to ensure you get the right level of coverage when renewing your business insurance. 

Just answer the questions below with a yes or no. The list where you’ve scored  the most yes's will identify whether your contractor is a LOSC or BFSC. 

Labour-only sub-contractors (LOSC)

1. Are they paid by you, either monthly, weekly, or hourly?
2. Can they receive overtime pay or bonus payments?
3. Do they only supply their small hand tools?
4. Do they always have to do the work themselves?
5. Can you tell them at any time what to do, where to carry out the work, or when and how to do it?
6. Can they work a set amount of hours?
7. Can you move them from task to task?
8. Do you complete risk assessments?

Bona-fide sub-contractors (BFSC)

1. Do they agree to do a job for a fixed price regardless of how long it will take?
2. Do they have a contract of service as opposed to a contract of employment?
3. Within an overall deadline, do they decide what work to do, how and when to do it, and where to provide the services?
4. Do they regularly work for several different people, as well as yourself?
5. Do they have to correct unsatisfactory work in their own time and at their own expense?
6. Do they hold their own Public Liability insurance in their name?
7. Excluding minor items and consumables, do they pay the cost of all materials or supplies required for the work without being reimbursed?
8. Can they hire someone to do the work or engage helpers at their own expense?
9. Do they risk their own money, e.g. if they bid for a job and the bid is too low, they have to bear the additional cost themselves?
10. Do they provide hire or hire in the main items of equipment they need to do their job, and not just the small tools that many employees provide themselves?

In summary

Labour-only sub-contractors are self-employed people, people hired or borrowed by you, or embedded into your business and therefore considered employees if they’re working for you and/or under your control. 

Bona fide sub-contractors don't work directly for your business; they work under their own control and terms, so should have their own insurance cover.

If you have any further questions on the difference between the two, or are now ready to arrange contractors’ cover, contact Howden today to discuss your insurance requirements on 0207 543 2807.