Here’s what you need to know about Sub-Contractors Insurance
Do you use sub-contractors within your business? If you do, you will need specific protection in place to protect both your business and the people who work for you.
Employers’ Liability (EL) insurance
Employers’ Liability Insurance covers employees who injure themselves or become sick in the course of their job and provides compensation accordingly (including costs and expenses). In construction, it is important to manage and understand the difference between labour-only sub-contractors (LOSC) and bonafide sub-contractors (BFSC). Errors in establishing this could result in you paying for insurance you don’t need or in contrast, not having the right insurance in place. With this in mind, it is essential that you correctly determine the status of your sub-contractor(s).
To simplify things if you have control in directing the workforce then you could be responsible for your labour’s health and safety. You should be arranging EL cover for them as well as declaring the payments to your brokers/insurers so that you are paying the correct insurance premium.
The difference between LOSC and BFSC
LOSC work under your supervision, using materials, equipment and tools provided by you. As they are working under your instruction and control, they are legally treated as employees and as such you need adequate EL insurance to cover them.
BFSC work under their own supervision, normally using their own materials and equipment and are paid by you in much the same way as if it were a normal customer job. As they are not under your direct control there is no need for EL cover. BFSC will have their own insurance in place for Public Liability (PL) cover, which is worth checking prior to commencement of any job – as many policies have a “checking clause” in them stipulating that you must check their cover.
It is a legal requirement that you are holding Employers Liability (EL) when required and this is laid out in the Compulsory Insurance Act 1969.
What happens if I don’t have the right level of cover in place?
In the unfortunate event of a loss, it could ultimately be the decision of the courts as to whether you had adequate cover in place. That’s why it’s important to establish whether you have the right cover in place and to get the correct advice on this area. Failure to do so leaves you at risk of potential prosecution or your insurance policy not responding when you need it to. If you need any advice in establishing your contractor set up, Cool Cover has a team of experienced advisors specialising in Contractors Insurance and are here to help.
To discuss your insurance needs, please call Cool Cover on 0207 101 4941.
