Using subcontractors is commonplace in construction.

A builder might bring in a roofer. A landscaping company may use a specialist tree climber. A groundworker might subcontract drainage or plant operations.

It gives businesses access to specialist skills without necessarily employing every trade themselves.

But subcontracting can also make your insurance arrangements more complicated.

One of the biggest mistakes contractors can make is assuming:

“They’re self-employed and they have their own insurance, so my business doesn’t need to worry about them.”

The reality can be more nuanced.

Your insurance requirements can depend on who you use, how they work, the level of control you have over them and whether they are genuinely operating as independent subcontractors.

Using subcontractors in your business? Speak to CHAS Insurance and make sure your policy accurately reflects how you work.

Does a Subcontractor Need Their Own Insurance?

Independent subcontractors will commonly arrange their own relevant business insurance, and you may want to check what protection they have before appointing them.

HSE guidance for businesses appointing tree-work contractors, for example, suggests checking whether contractors hold appropriate employers’ liability, public liability and professional indemnity insurance where relevant.

However, another contractor having their own insurance does not automatically answer the question of what your business needs.

You also need to consider the relationship between the businesses and what responsibility you retain for the overall project.

Do I Need Employers’ Liability Insurance for Subcontractors?

This is where the distinction between different types of subcontractors becomes particularly important.

UK employers generally need employers’ liability insurance as soon as they become an employer, with cover of at least £5 million from an authorised insurer.

But somebody calling themselves a subcontractor does not automatically determine their legal or insurance status.

Government guidance warns that employment status must reflect the actual working relationship rather than simply the label being used.

In practical insurance terms, brokers often need to understand whether the people working for you are operating independently or are effectively working as part of your workforce.

Labour-Only vs Bona Fide Subcontractors

These terms are particularly important in construction insurance.

Labour-Only Subcontractors

A labour-only subcontractor may work in a way that resembles an employee.

For example, they might:

  • Work under your direction
  • Use equipment you provide
  • Work hours determined by you
  • Carry out tasks as part of your team
  • Have limited responsibility for how the work is completed

Depending on the circumstances and policy wording, insurers may treat these workers differently from genuinely independent subcontractors.

Bona Fide Subcontractors

A bona fide subcontractor is generally operating as an independent business.

They may:

  • Provide their own labour
  • Supply their own equipment
  • Decide how the work is undertaken
  • Carry their own insurance
  • Take responsibility for their work
  • Invoice you for an agreed element of the project

However, these are broad indicators rather than a definitive legal test.

The actual relationship matters.

Not sure how your subcontractors should be treated for insurance purposes? Speak to your broker rather than relying on the word “self-employed”.

Why Does the Difference Matter?

Because it can affect how your insurer assesses the risk.

If you have people working under your direction, your insurer needs to know.

That may affect:

HSE guidance also makes clear that health and safety responsibilities do not disappear simply because work has been subcontracted. Contractors and subcontractors need to coordinate their work so that risks are properly managed.

What If My Subcontractor Already Has Public Liability Insurance?

That is useful, but it should not lead you to assume your own public liability insurance is unnecessary.

Consider a simple example.

You are the main landscaping contractor for a commercial project.

You subcontract the tree-felling element to a specialist arborist.

If something goes wrong, questions may arise around:

  • Who caused the damage?
  • Who contracted with the customer?
  • Who controlled the work?
  • Whether both businesses contributed to the incident
  • What each policy covers

Your subcontractor’s insurance protects their business according to its own terms.

Your policy protects your business according to yours.

They are not automatically interchangeable.

Should I Check a Subcontractor’s Insurance?

It is good practice to check that the contractors you appoint have appropriate insurance for the work they are undertaking.

For higher-risk or specialist work, you may want to check:

The insured business name

Make sure the certificate relates to the contractor you are actually using.

The type of cover

Public liability, employers’ liability or professional indemnity may be relevant depending on the work.

The policy limit

Does it meet the requirements of the contract?

The expiry date

Make sure the cover remains current while the work is being undertaken.

The activities covered

A £5 million policy is little comfort if the specialist work being carried out falls outside the policy’s scope.

Any requirements in your own policy

Your insurance may include conditions relating to the subcontractors you appoint.

HSE guidance also recommends assessing contractors’ competence and their approach to managing safety.

What About Subcontractor Qualifications?

Insurance is only one part of the picture.

You should also consider whether a subcontractor has the skills, knowledge and experience required for the work.

Under CDM 2015, contractors carrying out construction work must have the skills, knowledge, experience and, where relevant, organisational capability needed to complete that work safely.

That can be particularly important when subcontracting specialist activities such as:

  • Roofing
  • Scaffolding
  • Tree climbing
  • Excavation
  • Electrical work
  • Demolition
  • Plant operation

Using subcontractors should not become a shortcut around competency requirements.

What If I Start Using Subcontractors Midway Through My Policy?

Tell your insurer or broker.

Perhaps you previously completed all work using your own employees but have now won a bigger contract and need specialist support.

That is a change in how the business operates.

For non-consumer insurance, the Insurance Act 2015 requires a fair presentation of the risk when a policy is arranged and includes provisions covering variations to that risk.

Your own policy may also contain requirements relating to changes during the policy period.

Rather than trying to interpret those requirements yourself, tell your broker how your workforce has changed.

Common Subcontractor Insurance Mistakes

A few assumptions can create unnecessary uncertainty.

“They’re self-employed, so employers’ liability can never apply.”

Employment status depends on the real working relationship, not simply the label attached to it.

“They’ve got insurance, so I’m covered.”

Their insurance and your insurance protect different businesses.

“I don’t need to tell my insurer.”

Your insurer needs an accurate picture of how your business operates.

“I saw their certificate three years ago.”

Insurance expires. Check documentation remains current.

“They’re only doing a small part of the project.”

That small part could still involve significant risk.

Questions to Ask Before Using a Subcontractor

Before somebody starts work, consider asking:

  • What exactly are they being subcontracted to do?
  • Are they genuinely independent?
  • Will they work under your supervision?
  • Whose equipment will they use?
  • What insurance do they hold?
  • Does their cover include the activity they are undertaking?
  • Are their insurance limits high enough?
  • Do they have the necessary experience and competency?
  • Does your own policy contain subcontractor requirements?
  • Have you told your insurer how your business uses subcontractors?

That final point is easily overlooked.

Your insurer should understand how you actually deliver your work.

Subcontracting Specialist Work? Tell Your Broker

Subcontractors can be an important part of growing a construction or trade business.

They allow you to take on larger projects, bring specialist skills into your team and expand the range of work you can offer.

But they should also be reflected properly within your insurance arrangements.

CHAS Insurance is an insurance broker that specialises in commercial insurance for construction businesses and associated trades. We understand the different ways contractors use employees, labour-only subcontractors and independent specialist businesses.

We can discuss how your workforce operates and help you understand what information your insurer needs.

Using subcontractors or planning to bring them into your business? Contact CHAS Insurance today and make sure your insurance reflects the way you actually work.

This article provides general information only and does not constitute insurance, legal or employment-status advice. The treatment of individual workers and subcontractors will depend on the facts, applicable law and individual policy wording.