What’s the difference?
With the roll out of compulsory pensions schemes for all employees, we are seeing more businesses where they are encouraging their work force to become self-employed. Tempted by the saving in both Employers National Insurance and Pensions contribution they are also trying to save on their insurance by declaring them as Bona Fide Sub-Contractors but is this correct? When is a worker an employee, Labour Only Sub-Contractor (LOSC) or a Bona Fide Sub Contractor (BFSC)?
As a result of these changes, a number of Contractors believe that they do not even need Employers Liability as they always use Bona Fide Sub-Contractors for their contracts. It is an area that is causing much debate within this sector and even the HMRC are clamping down on how they tax these changes. The framework has been laid down by the Construction Industry Scheme (CIS) whose set of rules outline who can be regarded as a sub-contractor. The law is quite clear on how to consider if these people work for a business as employees.
- Do they have their own Public Liability insurance?
- Do they estimate for a job and agree a fixed price regardless of how long the job may take?
- Do they use their own tools and drive to the job in their own van?
- Do they cover costs of all materials or supplies required for the work?
- Do they have a contract of service rather than a contract of employment?
- Do they regularly do other jobs for different people other than the insured?
- Do they have the authority to hire someone to do the work with them at their own expense?
If the answer to most of these is ‘NO’ then they are regarded as an Employee or a LOSC as they are under the instruction of the principle. This means that their costs need to be taken into account as part of the overall employee wage roll figures when calculating their EL premium.
Businesses need to be aware that by wrongly advising these workers as BFSC’s it can leave their business exposed should a claim occur. We at Buckland Harvester Insurance Brokers can give specialist advice if you are in any doubt as to whether your workers are Labour Only or Bona Fide Sub Contractors to ensure full policy coverage at all times.