Bona Fide & Labour Only Subcontractors

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What’s the Difference between Bona Fide and Labour Only?

The categorisation of subcontractors often causes confusion. However, there are distinct differences between Bona Fide and Labour Only Subcontractors. Correctly classifying your subcontractors is of paramount importance as they have very different insurance requirements.

Bona Fide Subcontractors:

They undertake work where they ordinarily supply their own labour, materials and use their own tools.

Therefore, Bona Fide Subcontractors are responsible for their own risk assessments, in addition to supervising the health and safety aspects of their work. They are usually paid on a fixed price basis.

Bona fide subcontractors are responsible for arranging their own insurance cover and are usually required to indemnify you as their principal, in respect of work they undertake for you.

Labour Only Subcontractors:

They work under the direction and control of the employing company. Therefore, anyone utilising the services of a Labour Only subcontractor is responsible for risk assessing and ensuring that safe working practices are adhered to. Additionally, Labour Only subcontractors are usually paid on an hourly, weekly or monthly basis.

Employers have a statutory duty under Health & Safety law to protect all workers, not just those on PAYE. They are required to have Employers Liability Insurance  covering the scope of activities undertaken by direct employees, labour only subcontractors and any other paid or unpaid workers.

Labour only subcontractors aren’t responsible for arranging their own insurance cover in respect of work they undertake for you. Some may have their own policies, but irrespective of this they need to be covered under your Employers Liability policy. They also need to be covered by your Public/Products Liability insurance whilst working under your direction, supervision and control.

What Do I Need To Do When Using A Bona Fide Subcontractor?

To comply with your insurance policy terms and conditions, it is essential that you:

1. Ensure your Insurers are aware that you utilise the services of Bona Fide Subcontractors. Your insurers are likely to ask for details of your estimated annual payments to Bona Fide Subcontractors. This is also along with the scope of work they may undertake for you.

2. Ensure that you have rigorous Bona Fide Subcontractor vetting procedures in place. These are important for both risk management and insurance purposes. Furthermore, it is essential that all Bona Fide Subcontractors insurance details are checked and records maintained.

What Is A Bona Fide Subcontractors Insurance Condition?

Whilst each insurer will have their own specific policy conditions, the following is a typical example:

“When work is undertaken on your behalf by bona fide subcontractors, you will establish and maintain an administrative procedure, for obtaining evidence that bona fide subcontractors have affected public liability insurance that:

a) Covers the work to be undertaken by the bona fide subcontractor;

b) Is subject to a limit of indemnity of not less than £5,000,000; and

c) Includes an ‘indemnity to principals’ clause.
Such evidence shall be obtained prior to work commencing. And revalidated every 12 months throughout the duration of your contract with the bona fide subcontractors.

If you do not comply with this condition precedent our liability under this policy shall, at our discretion:

1. Be reduced by the amount which we reasonably assess our liability under this policy, net of any recovery from the bona fide subcontractor, would have been reduced if a valid and collectable policy had been in place; or

2. Exclude any liability attributable to work carried out by the bona fide subcontractor.”

There are some instances where policies are issued without an explicit Bona Fide Subcontractor condition. Therefore, an insurer could still look to rely on their ‘Reasonable Precautions’ policy condition. This would exclude liability attributable to work carried out, by inadequately insured Bona Fide Subcontractors.

How Do l Get A Bona Fide Subcontractor’s Insurance Details?

Bona Fide Subcontractors will be used to being asked for their insurance details as a matter of course. However, it isn’t sufficient just to obtain details of their cover limits, policy number and insurance provider.

It is important to check that each subcontractor is insured for the scope of works they will be undertaking for you. The business description on their policy needs to reflect what they will be doing for you, with no ambiguity or loose interpretations. For instance, the term “builder” may be interpreted as being able to undertake everything associated with a building project, however most builders will not be insured to undertake “roofing works” in isolation. In addition, it is important to check any special terms and conditions that may apply.

To assist in this respect, we have produced a ‘Draft Email – Bona Fide Subcontractor Liability Insurance Request’ template. This can be adapted to suit your specific requirements. For instance, if you have £5,000,000 Public/Products Liability Insurance cover you may wish to update to state: a’ minimum £5,000,000 limit of indemnity is required’ under the Public/Products Liability Insurance section.

DRAFT EMAIL – Request for Subcontractor Liability Insurance Details

We recommend logging all of your Bona Fide Subcontractors Insurance details in date order. In addition, requesting updated details prior to expiry. Furthermore, if a Bona Fide Subcontractor hasn’t provided you with adequate proof of cover, it is important that you don’t utilise their services. This is until such a time that they are able to so.

What Do I Need To Do When Using A Labour Only Subcontractor?


To comply with your insurance policy terms and conditions, it is essential that you:

  1. Ensure your insurers are aware that you utilise the services of Labour Only Subcontractors, whether frequently or infrequently.
  2. Ensure that you have both Employers Liability and Public/Products Liability insurance cover in place on the correct basis. Your insurers will need to have full details of the activities any Labour Only Subcontractors will be undertaking for you.
  3. Ensure that all Labour Only Subcontractors are treated in the same manner as direct employees. This is especially when it comes to Health & Safety requirements such as Safe Working Practices, Training, Risk Assessments & PPE.

Remember, even if a Subcontractor has their own separate liability insurance cover, this doesn’t mean that they are a Bona Fide Subcontractor. If they were to have an accident at work, they could look to pursue an Employers Liability claim. This would be in the same manner as any PAYE employee.