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Now For the Employees You Don't Think You Have
Posted by Graham Sykes on 27 January 2011 11:40 AM

These are Labour Only Sub-Contractors (LOSC). The fact that they are self-employed is really irrelevant as far as your insurance is concerned, LOSC are rated as a direct employee because they are under your control. The easiest way to understand this is to look at it as a "master and servant" relationship - rather antiquated in its terminology but effectively you are the master and the employee is the servant. You direct them in what they do, they generally provide labour only and you will probably pay them on a day rate or similar. They are paid for the number of hours or days they work for you.

Its worth mentioning here that there is another category that you need to be aware of, they are not rated under the employers liability section, as technically they will be providing a service to you, these are Bona-Fide Sub-Contractors (BFSC) and you need to differentiate between these and LOSC's because if you misunderstand the differences then you could be paying a premium that doesn't really need to be paid.

What is a BFSC? These will generally be businesses in their own right, they will provide materials (other than those you provide to them), they will hire their own plant, have their own employees and insurance and will invoice you for payment, generally on a pre-agreed contract price.

BSFC's will be rated under the "Public Liability" section of your policy, either way you need to disclose payments made to BFSCs. (One final point on BFSCs, you may find an endorsement 'condition' on your policy schedule that states Bona Fide Sub-Contractors must carry the same amount of Liability cover as you do. It's no good you having £5m indemnity limit when theirs is only £2m as the contingency cover you have would not work correctly.)