Knowing the differences between these two classifications can help protect your business from costly and damaging risks, including fines, penalties or even whopping insurance claims
As the owner or manager of a construction firm, you know that construction projects, no matter the size or scope, can be significant undertakings full of challenges. One such challenge that you may encounter deals with what type of subcontractors you hire—specifically labour-only or bona-fide. Knowing the differences between these two classifications can help protect your business from costly and damaging risks, including fines, penalties or even whopping insurance claims.
Who are Labour-only Subcontractors?
The defining characteristics of labour-only subcontractors are as follows:
Essentially, labour-only subcontractors are additional employees that you hire to assist with a build project that is too large or complex for your full-time staff to handle in a timely manner.
As these subcontractors are employed for the duration of the build project, you are required to pay them the same wages as your full-time staff and classify them as employees. In addition, your firm must cover each labour-only subcontractor under your employers’ liability and public liability insurance.
Who are Bona-fide Subcontractors?
The defining characteristics of bona-fide subcontractors are as follows:
Essentially, bona-fide subcontractors are hired to complete a specific job—such as plumbing or electrical work—on a build project that your full-time staff is not capable of completing on its own. As your firm would be hiring them on for a specific job, you would pay them as if it were a normal separate job, typically via invoice. In addition, because they are working independently of your firm, bona-fide subcontractors should have their own liability insurance.
What are the Risks of Confusing the Two?
Even though both subcontractor classifications are similar, confusing the two can expose your firm to costly and damaging risks. The most common risks include the following:
How Can I Protect My Business?
To guarantee that you are safeguarded against the potential risks that can arise from taking on subcontractors, review the following best practices:
Determining Labour-only v Bona-fide Status
If you can answer yes to all or most of the following questions, the worker is probably labour-only:
If you can answer yes to all or most of the following questions, the worker is probably bona-fide:
Understanding This Simple Difference Can Save You a Major Headache
If your construction firm needs to take on additional help in order to successfully complete a build project, you need to be absolutely confident that you understand the differences between subcontractors. That knowledge can help ensure that your firm avoids costly and damaging risks. For more information about how you can better safeguard your construction firm from potential hazards, contact the professionals at Kennett Insurance Brokers today.