IOSH forums home
»
Our public forums
»
OSH discussion forum
»
Sub-Contractor's Employers Liability Insurance
Rank: Forum user 
|
Morning all,
As a fit-out / refurb contractor our business is built around the use of sub-contractors, some are reasonably sized sub-contract companies, others are one man bands.
However, its the ones in the middle that I am interested in - those individuals who run a small company, flooring contractors, dry-liners, small builders, who have perhaps 3 or 4 "employees" depending on the size of the job and how much other work they have on.
My issue is that, for tax purposes these "employees" are not actually real employees, they are self-employed and because of this the business owner does not have employer's liability insurance.
I am right to be concerned about this ???
I've had the discussion with my director previously about asking these sub-contractors to get some EL insurance but he seems unable, or willing to understand my point. He keep bringing the discussion back round to whether they are employees in the eyes of HMRC, and missing the moral and legal duty of care angle.
Surely, even on the off chance of an issue on site, we should be covering ourselves by asking these small businesses to get EL insurance. If an incident occurs and we end up going down the road of a claim surely the IP's solicitor will advise their client to sue us the, Principal Contractor, rather than an uninsured small business.
Just wondered what others thought.
Thanks
Andy
|
|
|
|
|
|
Rank: Super forum user 
|
Your business does have a significant potential financial exposure but probably insured via your own existing regime, although indemnity limits may need to be looked at for adequacy.
The legal definition of employee for liability purposes differs from HMRC's and therefore your sub-contractors may well be acting illegally. You (ie your company) are condoning this practice.
|
|
|
|
|
|
Rank: Super forum user
|
David B has some very good points and the question to ask is ""is there a real chance of us being sued"" and to answer this I would talk with your company lawyers as its they who have the ear of the MD etc. and I would along go with their advice as its they who are deemed to be the experts and make sure that your back is covered
NB: Even the IR are not too bothered [note the recent tax law changes] as long as they get their tax one way or another. However the SS may have a different slant but again ask your company lawyers
|
|
|
|
|
|
Rank: Super forum user
|
This is an area that people often get confused about or think they can be clever and save a few quid. In my experience most large contractors insist that all subcontractors have insurance. The main reason for this is that the need to have insurance is dependent on the exact nature of how these self-employed operatives are engaged. Please refer to: http://www.hse.gov.uk/pubns/hse40.pdf“You are only required by law to have employers’ liability insurance for people who you employ under a contract of service or apprenticeship. Whether or not you need employers’ liability insurance for someone who works for you depends on the terms of your contract with them. This contract can be spoken, written or implied. It does not matter whether you usually call someone an employee or self-employed or what their tax status is. Whether you choose to call your contract a contract of employment or a contract for services is largely irrelevant. What matters is the real nature of your relationship with the people who work for you and the nature and degree of control that you have over the work they do.” It is impossible to police who is a genuine subcontractor and who is not. Therefore it is the norm on large sites that everyone has it. Most large contractors also have subcontractors insurance to protect themselves from the subcontractor to the subcontractor having none.
|
|
|
|
|
|
Rank: Forum user
|
Thank you for your responses.
I shall try and re-open the discussions.
Andy
|
|
|
|
|
|
Rank: Super forum user 
|
What i would be more interested in (if i was your MD) is if the actions of these "contractors" injure or kill someone, who is picking up the bill?
Will your company Insurance hit you with small print about joint liability and you end up with uninsured costs?
|
|
|
|
|
|
Rank: Super forum user 
|
I'm not sure whether the issue is a legal or moral dilemma with ELI? I could understand if it was PLI but don't really see what the issue is with ELI. If you're an employer it is a legal requirement.
|
|
|
|
|
|
Rank: Super forum user
|
You cannot insure against a breach in criminal law, so you only need to consider being sued for losses and damages, i.e. compensation
The insurers and solicitors will always look for joint liability, regardless of whether the party or parties involved are insured or not. It is a real mud fight which with the appropriate level of insurance your director can just sit on the side lines.
It is worth noting that those who should have insurance and do not, will be sued and the insurer/claimant will try and claim their assets.
I know of a case where the business was under insured which resulted in the industrial unit being sold (their main asset) to pay the bills. They then went after the director’s assets but I do not know if they succeeded.
They were also prosecuted and the business collapsed. Interestingly the crown court fine was not huge so that any money left could be paid in compensation.
|
|
|
|
|
|
Rank: Forum user
|
Hi Ray,
Thanks for your post.
I have a particular small builder that we use in mind in this post.
It is a limited Co. involving the main guy and maybe 4 or 5 other "operatives" who may, depending on specifics I don't know about, be genuine "Sub-Contractors", "Workers" or Employees.
Personally I feel the are not genuine subbies.
However, for tax reasons these operatives are self-employed.
Having just read the HSE document that Alfasev was good enough to highlight it seems that legally this chap may not require ELI but, if there were to be an accident on site and a subsequent claim the IP would be lucky to get much out of this building Co. especially as its limited.
Would the IP's legal team then turn to us, as the PC ???
When this issue arose previously, in spite of struggling to convince my director of the case, I asked the contractor in question at that time to go and get some ELi. He just did it; no questions. It cost him about £150.00.
|
|
|
|
|
|
Rank: Super forum user
|
fiesta
The principle in civil law is those with the 'biggest pocket' get sued. So, yes it is quite likely that in a civil claim the claimant would go for the PC rather than minnow.
There is problem with identifying an employee as from memory it is based on three factors, employment, tax and health and safety law. For health and safety purposes most self-employed, agency staff are considered as employees with the master/ servant test being the deciding factor. That said, many cases will be judged on case by case basis...another legal minefield for the sagacious lawyers.
|
|
|
|
|
|
IOSH forums home
»
Our public forums
»
OSH discussion forum
»
Sub-Contractor's Employers Liability Insurance
You cannot post new topics in this forum.
You cannot reply to topics in this forum.
You cannot delete your posts in this forum.
You cannot edit your posts in this forum.
You cannot create polls in this forum.
You cannot vote in polls in this forum.