Insurance for contractor?

ITGuy

Hi, I wonder if I could get some advice.

I run a small IT support business with the required insurance etrc. When I get work in that I can't physically do, holidays or too busy with other clients etc, I want to give that work out to a qualified friend of mine who will go out to the clients place of business or the users home and carry out the work. On some occasions he will be required to take the clients equipment back to our workshop or his home.

This friend would be going under our business 'umbrella' so I need to know what to do about insurance. Would it be something my business would take care of, i.e. we insure him, or is it something he would have to do himself?

He would not be an employee of us, just someone we sub contract to do the work we cant.

Also, other than insurance is there any thing else we might need to consider?

Thanks in advance.

olly300

The person needs to ensure he has relevant insurance himself like business coverage on his motor policy.

Then you just need all the insurance a normal employer would need i.e. public liability insurance, employees liability insurance

You should note what the law says is an employee for things like health and safety and discrimination reasons is different to what the HMRC regards as an employee. So even though he is not your employee for tax purposes for health and safety reasons he is.

Gavf123

He would require his own insurance but I wouldn't say this needs to be added onto your policy.

You would not require Employers Liability or Public Liabilty extended if you term your friend to not be working under your company.
This is something to check with a good broker but usually a sub contractor is not termed as a employee unless 15% or more of your turnover is being paid to the company or individual which in your case is unlikely.

This would be sub contracted out and your friend would require his own insurance. A self employed policy if working from home is ideal for them.
They would just need to make sure that it covers customers belongings in his control. Sometimes this is referred to goods in trust within insurance policy terms.

dacouch

Gavf123 wrote: »

He would require his own insurance but I wouldn't say this needs to be added onto your policy.

You would not require Employers Liability or Public Liabilty extended if you term your friend to not be working under your company.
This is something to check with a good broker but usually a sub contractor is not termed as a employee unless 15% or more of your turnover is being paid to the company or individual which in your case is unlikely.

This would be sub contracted out and your friend would require his own insurance. A self employed policy if working from home is ideal for them.
They would just need to make sure that it covers customers belongings in his control. Sometimes this is referred to goods in trust within insurance policy terms.

The above is not the definition that is used in Insurance for a subcontractor, it is a slightly grey area but the general definition is as follows.

A Labour Only Subcontractor is some one who provides their labour and / or does not work under their own direction and / or does not provide their own materials. If you have any labour only subcontractors they will normally fall under your Public Liability and you should ensure Employers Liability is in place.

A Bona Fide Subcontractor is someone who works under their own direction and / or provides their own materials. They would not normally need to be covered under your policy for Public Liability or Employers Liability although its best to declare them to your Insurers as they will normally provide contingent cover. You should ensure any Bona Fide Subcontractors carry their own Insurance

As the OP has indicated his friend who I guess is not self employed will be taking things back to the OPs home to work on I'm guessing they will probably come under the Labour Only Subcontractor definition.

If they are taking things back to your home it can cause an issue with your Home Insurance if you do not inform your Insurers. If you do inform your Insurers they may not want to cover it unless you have a Home Worker / Self Employed home insurance policy as Olly mentioned.

Gavf123's advice on consulting your broker / Insurer is good advice, this can be a minefield so it would be sensible to put it in writing to them or email them what you are doing so their is a paper trail in case of dispute

mattymoo

Dacouch mentioned this thread to me as he knows I work for a Lloyd's syndicate that specialises in insurances for contractors.

Your friend is indeed a labour only subcontractor and you are therefore required to have employers liability cover in place if you haven't already got it. Payments made to him would be declared as LOSC wages.

Public liability cover would not be affected and is not a legal requirement in any event. Most firms in your field tend to have it in case they drop a client's PC and face an overinflated claim for loss of data etc.

Dacouch's definititions are spot on for LOSC and BFSC. Even if your friend set up his own firm and charged you B2B, he would still be a LOSC because he is providing labour only.

DCodd

mattymoo wrote: »

Dacouch mentioned this thread to me as he knows I work for a Lloyd's syndicate that specialises in insurances for contractors.

Your friend is indeed a labour only subcontractor and you are therefore required to have employers liability cover in place if you haven't already got it. Payments made to him would be declared as LOSC wages.

Public liability cover would not be affected and is not a legal requirement in any event. Most firms in your field tend to have it in case they drop a client's PC and face an overinflated claim for loss of data etc.

Dacouch's definititions are spot on for LOSC and BFSC. Even if your friend set up his own firm and charged you B2B, he would still be a LOSC because he is providing labour only.

This being the case, HMRC will see him as an employee as well and want employers NI contributions unless you have a sub-contract agreement in place that meets specific requirements. Your friend can be an employee of yours even if he only works for ONE day as far as HMRC is concerned and even if he has a Ltd company setup. Google sub-contracts and employee status and take advice.

dacouch

The HMRC use a wider description to work out if they are a labour only subcontractor / employee. They have a test which is if you were ill or took time off would you send some one in your place or would the company your working for arrange their own cover whilst your away. They mainly brought this definition in for companies who placed IT employees on a self employed basis which saved the company and employee money in tax (This is not the only test they use).

Insurers generally use the test I posted as this is the one used legally if the contractor caused damage and there was a Public / Product Liability Claim or more likely an Employers Liability Claim.

I've seen cases where people employ friends and don't cover themselves properly, when the friend has an accident while working and speaks to a no win no fee solicitor the friendship goes out of the window and the solicitor will sue them.

It is definately best to take advice on the issue

rach29

A good place to look for advice on contractors etc is here

p.s. I am not affiliated to them in any way

DCodd

rach29 wrote: »

A good place to look for advice on contractors etc is here

p.s. I am not affiliated to them in any way

Good site rach29, interesting the MP's question was not answered. The Company I work for is in the Construction Industry and IR35 plays a very big role. We employed the services of a specialist insurance company who adivsed us of the contracts we needed to issue to be compliant etc. We were then inspected by HMRC and the insurance company provided (at a cost) a specialist to sit in on the inspection (he was an ex HMRC inspector himself) as soon as the 2 inspectors saw our man they backed down on employment status and agreed that there were no issues regarding employment status!

I would suggest that this is becoming a more common reaction from HMRC as businesses become more savvy when it comes to IR35 and courts have shown that they want HMRC to prove employee status as much as compaines have to prove sub-contractor status. So the answer to the MP's question would be embarrasing to HMRC IMHO.

P.S. HMRC rely heavily on the rule, does the person risk financial loss if the work goes wrong or there are problems i.e. if your friend takes 10 days to do 5 days work does he get paid for 10 days or 5 and if he damages equipment does he pay for it etc etc.

ITGuy

Hey guys, thanks for giving this thread the time of day. I should perhaps clarify some more.

I do not have a business premises as such. I provide IT support for small businesses and home users. For my regular small biz contracts, I visit their premises and resolve any IT issues they have on a regular basis.

Often I get one time calls from home users and small businesses and If I cannot resolve their issues on site, I often take their equipment back to my workshop which is the garage attached to my private residence.

There are times when I get a call and cannot take on the job because I am on another job, or perhaps on holiday etc. My friend who is a qualified IT technician works part time for a large employer. I would like to be in a position of getting him to do some of the jobs I cant. If I were to give him work, I would ensure he was also registered as self employed, but obviously I want to cover my own back and reputation by making sure he's sufficiently covered.

He would be required to visit the customers business / home. If he couldn't resolve the issue on site, he would take the equipment, PC, laptop etc back to HIS home and work on it there.

I don't expect the level of work I give him to be huge at this stage as my business is still in its infancy.

It is sounding like it's not going to be worth our while to do this.