The guidance on this site is based on our own analysis and is meant to help you identify options and narrow down your choices. We do not advise or tell you which product to buy; undertake your own due diligence before entering into any agreement. Read our full disclosure here.

Employers' Liability for Contractors and Subcontractors

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Employers’ Liability for Contractors and Subcontractors

If you employ staff in the UK, whether an employee or contractor, you’re legally required to hold an appropriate level of employers’ liability insurance to make sure you and your business are protected if they’re injured or become unwell and feel your business made an error in the process.

There are some cases when a subcontractor is not required to be covered by your employers’ liability insurance, however it’s important to assess the situation properly before bringing them onboard for a piece of work. This guide should cover exactly when you do and don’t need employers’ liability to cover contractors and subcontractors. But if you have any doubts or to confirm that you’re covered properly, explain your situation to your business insurance broker or an agent if you work directly with your insurer to be sure.

What is a subcontractor?

In order to correctly assess whether or not a contractor/subcontractor requires your employers’ liability cover, it’s important to identify exactly what it is they do for you and the nature of their agreement with your business.

TitleJob DescriptionRequires you to hold employers’ liability?
ContractorEnters into an agreement with your business directly for a specific role, task or piece of workYes
Labour-only subcontractorEmployed through another business/agency, takes your instructions and works with other employees/contractors. Regularly uses your materials, tools, etc.Yes
Bona fide subcontractorProvides their own tools, materials, etc. and usually works with limited supervision. Often sets their own hours and will usually be paid by sending you an invoice themselves. May also be employed by multiple businesses at one timeNo

Hiring a subcontractor

If you are bringing a subcontractor onboard, there are a few things you’ll want to do before they begin work. Firstly, make sure to confirm that they hold their own public liability insurance in case they are at fault for any property damage or injury while working with you. If they’re acting as a source of knowledge, and providing advice, recommendations or assisting with blueprints/designs, you should also confirm they hold professional indemnity cover.

You’ll also want to get them to sign a contract that contains both standard employment terms (pay, payment method, reasons for termination, role, etc.) but also confirms that they are responsible for their own tax (national insurance, income tax, etc.) deductions just to make sure they agree that your business holds no responsibility if there is an issue in the future.

What is the difference between a labour only subcontractor and a bona fide subcontractor

The difference between labour only and bona fide subcontractors lies in how they’re paid, the equipment they use, how they’re insured, how much direction they’re given and how they work.

Labour OnlyBona Fide
Paid on a regular basis, confirmed in their contractInvoices you for work complete, not always on a regular interval
Your business provides them with the equipment they needThey provide their own equipment
Does not require their own insuranceIs able to produce proof of public liability insurance (and possibly employers’ liability, if they’re bringing additional staff with them) on request
They take instructions from your businessThey’re generally left to their own devices to complete the work agreed
Can be reassigned to other tasks as requiredOnly required to complete the work agreed in the contract

If you are going to hire a contractor, it’s important to make sure you can correctly identify whether they are labour only or bona fide. Make sure to properly consider the role before the person signs a contract with you, and identify whether it’s more suited to a labour only or bona fide subcontractor, as failing to do so properly could create a headache down the road—especially if the subcontractor never signed an agreement to confirm they were responsible for their own tax payments.

How to add Contractors to Employers’ Liability insurance

When it comes to setting up your policy, your insurer will ask you whether or not you employ contractors (and probably how many you employ at one time on average or throughout the year). As long as you’re honest with them, any contractor you bring in should be covered automatically, so you don’t need to change anything about your policy.

If you’re just bringing in contractors for the first time, you’ll need to contact your employers’ liability provider to see if there’s anything you need to change. From our research, many of the insurers for industries that do typically hire contractors (construction, carpentry, etc.) provide coverage for contractors automatically (even if you aren’t employing any when you sign-up, assuming you can give the insurer details of how many you might hire at any given time). That being said, be sure to double check just to make sure you don’t get caught out.

Important things to think about before bringing contractors on board

Bringing in external support can be an excellent way to help get your projects and work where it needs to be. You might not have the staff capacity immediately available, or may be lacking in a specific area of expertise—contractors can help fix these issues quickly and efficiently.

If you are going to bring someone in, firstly consider that it might take them a little bit of time to get up to speed with your internal processes/systems. Make sure to communicate with them clearly, and if possible perhaps have some guideline documents prepared for them when they start so they know how you operate and what’s expected of them. Things like sitemaps can help navigation during the early stages of a project, improving efficiency massively.

If they’re a bona fide subcontractor, they might be using their own materials too. Ask to see where they’ll be sourcing things from, to make sure they’re using products of a sufficient quality.

How to hire good contractors/subcontractors

Hiring contractors can be a risky business. You might not have the time to conduct as thorough of an interview process as you would for a full-time employee, and there are certainly some who have a mercenary attitude that makes it difficult for them to feel responsible for the success of a project.

That being said, there are many excellent contractors out there who can support you in a number of different ways for a specific piece of work. You won’t have to deal with the long-term costs of hiring an employee, nor will someone be left twiddling their thumbs after the completion of their work.

Hiring properly can be tough at the best of times, but there are a few things you can do to make sure any contractor or subcontractor you bring in will be of good quality:

  • Reference check with at least one (recent) previous employer
  • Clearly document their responsibilities in a contract
  • Check for public liability (and employers’ liability if they’re bringing any staff with them)
  • Review any technical qualifications they mentioned during the interview process
  • Ask for evidence of previous work done (photographs, customer testimonials, etc.)

Quality Business Insurance

Making sure your contractors are properly insured is just one part of your business's insurance responsibilities and requirements. Check out our guides to business insurances to make sure you’re properly covered.


The guidance on this site is based on our own analysis and is meant to help you identify options and narrow down your choices. We do not advise or tell you which product to buy; undertake your own due diligence before entering into any agreement. Read our full disclosure here.