Bona Fide Sub Contractors (BFSC), Labour Only Sub Contractors (LOSC) and Employees
This is a subject that causes much confusion, probably down to just one of the words in the title – “Employees”.
Many firms use subcontractors, and never consider them as employees because they are not “cards in”, but in reality it’s not as simple as that, it’s about how contractor and sub-contractor work together, as well as responsibilities.
These are contractors who work without oversight and instruction from the principal contractor, and usually provide their own tools and materials. A workable definition is hard to come up with, but there are a number of principals which should be considered which will help decide:-
- Is there an agreed fixed price for the sub-contractor to carry out a job or task?
- Does the sub-contractor pay cost of materials and have their own hand tools?
- Can the sub-contractor bring in other contractors to help with the work, or even do all the work?
- Are they responsible for “snagging” at their own cost?
- Do they work for a variety of principals?
If the answer is to most of the above is YES, then they are probably BFSC, and should have their own Public Liability (PL) Insurance in place (as well as Employers Liability (EL) cover if they have their own employee) which should have at least the same level of cover as the principal contractor.
- Do they have to do their allocated work themselves, without the ability to contract that out to someone else?
- Are they paid a wage rather than an amount per contract?
- Do they use the principal’s hand tools?
- Do they get told how and what to do at the job by the principal contractor?
- Can the principal contractor move them from task to task as the contract requires?
If the answer to most of these questions is YES, then the worker is probably not BFSC, but a LOSC.
For the purposes of insurance LOSC’s should be treated as Employees, and have the same rights as Employees, which should include consideration for Health and Safety, training and the like. There could also be other contractual considerations, for instance holiday and sick pay, pension, workers’ rights and the like.
Employers Liability Insurance must be taken out – it’s a legal requirement – and payments to LOSCs (or numbers of LOSCs if insurance is on a “per capita” basis) should be fully disclosed.