Is Employers' Liability Insurance Needed for Subcontractors?
The short answer
It depends on how the person works, not what you call them. A labour-only subcontractor you direct and supply is treated as your employee, so your employers' liability policy must cover them. A bona fide subcontractor who runs their own work needs their own insurance, and you should see the certificate.
- The label doesn't decide it. HSE looks at control, tools, substitution and tax, not whether you call someone self-employed.
- Labour-only = your employee for insurance. Declare them to your insurer and cover them under your own policy.
- Bona fide subcontractors insure themselves. If they employ anyone, they need their own employers' liability cover. Ask for the certificate.
- At least £5 million. Being without proper cover can cost up to £2,500 a day in fines.
You've got two employees, a labour-only gang on day rate and three trades who invoice by the job. Something goes wrong on site. Whose insurance pays?
This guide is for UK building company owners who use a mix of staff and subcontractors. It shows who your employers' liability insurance has to cover and what to check before anyone starts.
It comes from the owner of a working London construction company that runs its projects through a supply chain of trades. If you'd rather talk it through, book a free strategy call.
What the law actually requires
The Employers' Liability (Compulsory Insurance) Act 1969 says you must insure against injury or disease to your employees. The policy must be for at least £5 million, costs included. Most insurers offer £10 million.
The key word is employee. The law doesn't care what you call someone. HSE is clear that whether you label a worker "employed" or "self-employed" doesn't matter. What matters is how the work is really done and how much control you have.
Employee or not? The HSE test
HSE lists the signs that someone may be your employee for insurance:
- Tax and NI: you deduct income tax and National Insurance.
- Control: you decide where, when and how they work.
- Tools and materials: you supply them.
- Personal service: they must turn up themselves and can't send a substitute.
- Treatment: you treat them the same as your other staff.
The opposite points the other way. They work for others too, bring their own kit and run their own business. They can send someone else, and invoice you without tax or NI taken off.
Thinking CIS settles it. A worker registered for CIS, paid with 20% deducted, can still count as your employee for insurance. That happens when you direct the work and supply everything.
Mix of employees, labour-only and subcontractors?
Book a free call with our team. We'll go through how you take people on and the checks that protect your company.
Labour-only vs bona fide subcontractors
On a building site this splits into two groups. The Federation of Master Builders puts it simply: labour-only subcontractors are treated as employees for insurance; bona fide subcontractors are not.
| Who | How they work | Whose employers' liability covers them |
|---|---|---|
| Your employees | On your payroll | Yours |
| Labour-only subcontractor | Your direction, your tools and materials | Yours: declare them to your insurer |
| Bona fide subcontractor with staff | Runs their own work, own tools, own H&S | Theirs: they must hold their own |
| Sole trader with no staff | Runs their own work | None required by law; check their public liability |
| One-person Ltd company, owner holds 50%+ | Runs their own work | Exempt by law; contracts may still ask for it |
The risk sits in the grey middle. A "subbie" who has worked only for you for two years, on your tools, at your hours, looks a lot like an employee. If they're hurt and your policy doesn't know they exist, you may be the one paying.
If you're still deciding which way to build your team, read whether to employ or subcontract your labour.
Got a long-term subbie who works like staff?
Book a free strategy call and we'll check who your policy really has to cover.
The routine to run before anyone starts
This is the routine we suggest. It is our method, not a legal checklist, but it keeps every answer on paper:
- List everyone: every person who worked on your sites in the last month, with how you pay them.
- Sort them: employee, labour-only or bona fide subcontractor, using the HSE signs above.
- Tell your insurer: give the right number of people and the labour-only workers. Ask in writing whether they're covered.
- Collect certificates: from every bona fide subcontractor: employers' liability if they employ anyone, public liability always. Note the expiry dates.
- Write it into the subcontract: the cover you require, and that they send the renewal before the old one runs out.
- Keep old certificates: HSE advises it. Some industrial diseases show up decades later.
Put your own certificate where staff can see it, on site or online. If something does go wrong, follow what to do after an accident on site. For choosing who to bring in, see how to find reliable subcontractors.
A supply chain is a system
Most owners don't skip this on purpose. People get taken on by phone, in a rush, for a job that starts on Monday. The fix is one onboarding step that nobody skips:
- One form Status, insurance, CIS check and emergency contact, filled in before day one.
- One owner A named person who checks certificates and chases renewals.
- One file Per subcontractor, with every certificate and expiry date.
Adam and Ali ran jobs worth £49K and £12K fully through subcontractors. After putting structure in place, they won a £528K project in about 4 months.
Individual results, not typical or guaranteed.
Sviat mentors owners one to one himself, while still running his own construction company. He looks at how you hire, subcontract and run your sites, then builds the system that fits your business. The aim is results in about 4 months, not the 1–3 years many coaching programs take.
To build a supply chain that's safe to grow, book a free strategy call. Or score your business in 4 minutes with the free Construction Business Scorecard. If clients ask for CHAS or SafeContractor too, our accreditation service gets your insurance and safety evidence organised and submitted for you.
The Systems Blueprint for UK Builders
The 6 core systems a growing building company needs, with a 30-day build order. Free PDF.
Get the free guideThis guide is general information, not legal or insurance advice. For your own policy, speak to your broker or insurer.
Before the next person starts on site
- You know if they're an employee, labour-only or a bona fide subcontractor
- Your insurer knows about every labour-only worker
- You hold their current insurance certificates and expiry dates
- The subcontract says what cover they must keep
- Your own certificate is on show where staff can see it
