Subcontractors are common in construction and trade work.

You may bring someone in for a few days, a single job or a longer project. But the insurance position is not always clear.

One of the biggest questions is this:

Do you need employers’ liability insurance for subcontractors?

The answer depends on the type of subcontractor and how they work for you.

What is employers’ liability insurance?

Employers’ liability insurance can help protect your business if someone working for you becomes injured or ill because of their work.

In the UK, most businesses must have employers’ liability insurance as soon as they become an employer.

This applies to many contractors, trade businesses and construction firms.

The cover can help with compensation claims and legal costs if an employee makes a claim against your business.

Do contractors need employers’ liability insurance?

If you employ staff, you will usually need employers’ liability insurance.

This includes full-time staff, part-time staff, temporary staff and some casual workers.

For contractors, this can also include certain types of subcontractors.

That is where the difference between labour-only subcontractors and bona fide subcontractors matters.

Labour-only subcontractors

A labour-only subcontractor usually works under your control.

They may use your tools, follow your instructions, work your hours, and be treated much like an employee while they are on the job.

They may still call themselves self-employed. But for insurance purposes, they may need to be treated like an employee.

This means they may need to be included under your employers’ liability insurance.

For example, you may bring in a labourer to help on site for two weeks. You tell them what to do, when to arrive, where to work and how the job should be done. In that case, they are likely to be labour-only.

If they are injured while working for you, your business could face a claim.

Bona fide subcontractors

A bona fide subcontractor is more independent.

They usually work under their own control, use their own tools, provide their own materials where needed, and decide how the work is done.

They should also have their own insurance.

For example, you may hire a specialist roofing company, electrical contractor or plastering firm to complete a defined part of a project. They quote for the work, manage their own labour and carry their own cover.

In this case, they may be classed as bona fide subcontractors.

You should still check their insurance before they start work.

Why the difference matters

The difference matters because it affects your responsibility.

If someone is working like an employee, you may be responsible for their safety in the same way you would be for your own staff.

If they are genuinely independent, they should usually carry their own insurance.

But this can be a grey area.

The label “subcontractor” is not enough on its own. What matters is the working relationship.

Ask yourself:

  • Do you control their work?
  • Do you set their hours?
  • Do they use your tools?
  • Do they work under your supervision?
  • Can they send someone else to do the work?
  • Do they carry their own insurance?
  • Are they responsible for their own health and safety?

The answers can help show whether they are labour-only or bona fide.

What happens if you get it wrong?

If you treat someone as a bona fide subcontractor when they are really labour-only, your insurance may not reflect the real risk.

This could cause problems if there is a claim.

It may also mean your wage roll or subcontractor payments have not been declared correctly to your insurer.

That can affect the way your policy responds.

It is always better to be clear before work starts.

What should contractors check?

Before using subcontractors, check how they will be working with you.

For labour-only subcontractors, make sure they are included within your employers’ liability arrangements where needed.

For bona fide subcontractors, ask for proof of their own insurance. This may include public liability insurance and employers’ liability insurance if they have their own staff.

You should also check that their cover level matches the job and contract requirements.

Do not just ask once and forget about it. Insurance documents can expire, so it is worth keeping records up to date.

Do sole traders need employers’ liability insurance for subcontractors?

A sole trader may still need employers’ liability insurance if they use labour-only subcontractors or employ anyone.

It does not only apply to limited companies.

If someone works under your direction and control, you may need cover.

This is common in trades and construction, where extra labour may be brought in to help finish a project.

What insurance might subcontractors need?

Subcontractors may need different types of insurance depending on their work.

This could include:

The right cover depends on the job, the contract and the risk involved.

Speak to CHAS Insurance

CHAS Insurance helps contractors and trade businesses understand their insurance options.

If you use subcontractors and are not sure how they should be covered, we can help you review the risk.

Speak to the CHAS Insurance team about employers’ liability insurance for contractors and subcontractors.