Labour-Only vs Bona-Fide Subcontractors: What’s the Difference?

Why Subcontractor Classification Matters

If you run a trade or construction business, you’ll probably use subcontractors at some point. But when it comes to insurance, not all subcontractors are treated the same.

Insurers make a clear distinction between labour-only subcontractors (LOSCs) and bona-fide subcontractors (BFSCs). If you misclassify someone, you could find yourself underinsured or worse, facing a rejected claim.

Here’s what you need to know.

Labour-Only Subcontractors (LOSCs)

Labour-only subcontractors are extra workers who fit into your team and operate much like employees, even if they’re not on your payroll long-term.

Typical signs someone is a labour-only subcontractor:

• You tell them what to do, when to do it, and how.

• They use your tools, equipment, and materials.

• They follow your health and safety procedures.

• You pay them hourly, weekly, or monthly, rather than by invoice.

• You can reassign them to other tasks if needed.

Because they behave like employees, insurers normally expect LOSCs to be included in your employers’ liability and public liability insurance.

Example: You take on three labourers for a loft conversion. You provide their tools and direct their work. These are LOSCs.

Bona-Fide Subcontractors (BFSCs)

Bona-fide subcontractors are independent businesses brought in for specialist jobs, plumbing, electrics, roofing, etc. They run the job themselves and carry their own risks.

Typical signs someone is a bona-fide subcontractor:

• They decide how and when the job is done.

• They provide their own tools, materials, and equipment.

• They work under a fixed-price contract and send an invoice (often with VAT).

• They’re responsible for their own health & safety.

• They may employ their own staff.

• They should hold their own public liability insurance (always ask for proof).

Example: You bring in a qualified electrician to rewire a kitchen. They set the price, supply the kit and invoice you once the job’s done. This is a BFSC.

Why the Distinction Matters

Insurers need to know the split between LOSCs and BFSCs because they’re covered differently:

• LOSCs → Included under your employers’ liability and public liability.

• BFSCs → Expected to have their own insurance. You should check and record it.

If you don’t get this right, you could face gaps in cover or find your insurer refusing part of a claim.

FAQs: Subcontractors and Insurance

Do I need to insure labour-only subcontractors? Yes. They act like employees, so insurers usually expect them to be covered under your employers’ and public liability insurance.

Do bona-fide subcontractors need their own insurance? Yes. They should carry their own liability insurance. Always request proof and keep it on file.

What happens if I misclassify subcontractors? You risk being underinsured. In some cases, an insurer could refuse part of a claim.

How do insurers check subcontractor status? They look at how the subcontractor is paid, who supplies tools and materials, who directs the work and whether the subcontractor carries their own insurance.

Final Word

A simple rule of thumb is:

• If they work like part of your team, they’re labour-only.

• If they work as their own business, they’re bona-fide.

If you’re not sure, check your policy wording or ask your broker.

At MPI Tradesman, we help tradespeople across the UK make sure subcontractor arrangements are declared correctly and covered properly so you don’t get caught out later.