SUBCONTRACTORS: ARE YOURS COVERED?
Subcontractors are an important part of the cleaning industry, so Lynda Allan, Director at Polished Insurance, wants to make sure you know your coverage.
Cleaning businesses often use subcontractors instead of employed staff. This can help with costs and enables business owners to have more flexibility to cover contracts. In theory, this should be a wise financial move. But, when you’re making the choice to use subcontractors, do you ensure that your insurance for the subcontractor is adequate? If it’s not, a claim could lead to costs far higher than the recruitment of an army of cleaners.
There are two main types of subcontractor: bona fide and labour only subcontractors. Each requires a different set of insurance criteria for you and here is an explanation of exactly what you need to consider.
WHAT IS A BONA FIDE
SUBCONTRACTOR? If your subcontractor is bona fide, the following will often apply. They will have undertaken their own risk assessment, provided a method statement, and taken responsibility for assessing the health and safety requirements of a contract. They provide their own tools and materials and may even not need to take any direction from you. As such, you will not be required to include them in your Employers Liability insurance; any liability is their own and you are not accountable.
Checklist for bona fide subcontractors:
• Take no on-the-job instructions from you
• Not supervised by you • Use own materials and tools
• Have their own Public Liability/ Employers Liability Insurance
• Responsible for their own Health and Safety
• Provide their own method statement and are responsible for their own guarantees and maintenance
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However, it is your responsibility to ensure that you have inspected all relevant documentation. If there is a loss to your business due to work undertaken by your bona fide subcontractors, you must be able to demonstrate to your insurers that you checked your subcontractor’s public liability cover and that it has either the same or higher limit of indemnity as your own policy.
If you are unable to demonstrate this to their satisfaction they will not make any payment.
Your own Public Liability policy will act as a contingency should your bona fide subcontractor’s policy fail. It is essential that you have adequate Public Liability insurance cover in place as the contract is between you and the customer. For example, if something goes wrong, even if the fault was that of the bona fide subcontractor, the customer would sue you.
WHAT IS A LABOUR
ONLY SUBCONTRACTOR? Labour only subcontractors work under your direction and do not provide their own materials or tools. They are considered to be the same as PAYE employees, so you must include them in your employee numbers for the calculation of your Public and Employers Liability insurance premium, even if they are officially self-employed. You are also under obligation to ensure they are protected under Health and Safety law to the same extent as a PAYE employee. In which case if there is an accident you can claim under your Employers Liability Insurance.
Checklist for labour only subcontractors:
• An individual or company supplying labour only
• Take instruction from you
• Work under your own method statement
• Use materials and tools that are not their own
• Covered by your Public Liability and Employer Liability Insurance
• Full wages insured by you
• Must comply with your Health and Safety policies
• Usually paid hourly and can be fired
• No work guarantee and may leave part way through
If these points apply, your responsibilities are far greater than when using bona fide subcontractors. An assessment for taxation and the assessment for whether the Employers Liability Act covers someone are different. A labour only subcontractor may be responsible for their own tax but you may be responsible for any injuries they sustain at work.
www.polished-insurance.co.uk FEATURE | 59
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