Subcontractors, Bona Fide Subcontractors And Insurance, Whats The Deal?

Subcontractors, Bona Fide Subcontractors And Insurance.

Why do construction companies need to insure labour-only subcontractors when they are working on their contracts?

Labour only subcontractors should be treated as employees for the purposes of cover under the insurance. Generally, a subcontractor will work under the direction of the Insured and do not provide their own materials or tools, they may use their own hand tools but essentially they will be using your tools and equipment and be directed by you.

There are two types of subcontractor that can be used to carry out your project requirements; a subcontractor or a bona fide subcontractor. The insurance cover you take out will vary depending on the type of contractor used.

The Inland Revenue identifies the difference between a sub-contractor and a bona fide contractor as the following.

Labour only subcontractor (LOSC)

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


It is imperative that you have Employers Liability for a subcontractor even if they only work for you for a short period of time. You should also advise your insurance company of all payments made to labour-only subcontractors together with the number of people working on site at any one time.

Bona fide subcontractor (BFSC)

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


You may need to check that your bona fide subcontractor has public liability insurance in place and the indemnity amount should be the same limit as yours. This should be checked and confirmed before they are appointed to work on your project. Ensuring this cover is in place will protect you should there be any damage caused to property or someone is injured by them whilst they are working on your job as a sub-contractor.

It is important that you declare to your insurance company how much pay the bona fide subcontractor receives from you annually, this allows for contingency public liability cover to be added to your insurance policy to protect you in case of a claim where the subcontractor does not have the appropriate insurance cover in place. Contingency public liability cover costs less than the standard average and gives you peace of mind to know you are covered.

If you are a construction company looking for subcontractors insurance get in touch today

Picture of Rebecca Haynes
Rebecca Haynes
Rebecca is the Operations Manager at Glowsure and a self confessed insurance nerd. She helps businesses and landlords to retain income and continue trading in the event of a claim.
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