Hiring Bona-Fide Subcontractor vs Labour-Only | Checkatrade
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Should you hire bona-fide subcontractors or labour-only subcontractors?

With a growing workload or larger one-off projects in the pipeline, you need more hands on deck. But do you choose to hire a labour-only subcontractors or a bona-fide subcontractors? Let's work out what you need.

What is subcontracting?

Subcontracting is a flexible way for your business to take on different projects and opportunities. For example, subcontractors can enable your business to:

  • Commit to larger, one-off projects
  • Respond to an increased workload as your business grows
  • Bid for more varied contracts that might require specialist trades

Hiring a subcontractor can be a great way to support your growing business. It allows you to take on additional work and extend your offering.

There are two types of sub-contractor: labour-only and bona-fide subcontractors.

In this post, we’ll look at bona-fide subcontractors vs labour-only and answer some of the commonly asked questions.

Find out more about the difference between outsourcing and in-house, too.

What is a labour-only subcontractor?

The definition of a labour-only subcontractor (LOSC) is what it says on the tin – labour only. The tradesperson works under your instruction, using your tools and materials.

They are seen as an extension of your business. This means that you will be held accountable for any quality issues or accidents that arise during their work.

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Bona fide subcontractor at a building site

How are labour-only subcontractors paid?

Labour-only subcontractors are usually paid by the hour, day, or week. This gives you more flexibility and value for money.

Being self-employed, labour-only subcontractors must pay their own income tax and National Insurance.

However, if they don’t, it will be your business that it responsible for any debt – unless you are CIS registered.

Do labour-only subcontractors need their own insurance?

Labour-only subcontractors (LOSC) won’t normally need their own liability insurance as they don’t have a business structure of their own. They are considered as employees for the purpose of your employers’ liability insurance.

If any quality issues or accidents arise during the work of an LOSC, the owner of the business will be held responsible.

So, if you hire a LOSC, you must ensure they are covered by both your public liability and employers’ liability insurance.

What is a bona-fide subcontractor?

A bona-fide subcontractor (BFSC) is someone who works under their own direction, using their own tools and materials.

They are usually brought in to complete a specialist job as part of a wider project. For example, if you’re in construction, you might subcontract the plumbing or electrical work in this way.

Discover more about the pros and cons of outsourcing work.

Labour-only subcontractor on a building site

How are bona-fide subcontractors paid?

A BFSC will usually provide an initial quote for the job you’ve contracted them to do. This is then paid on completion, or in agreed instalments.

This means you can set a clear budget for the project and avoid any unexpected costs.

Do bona-fide subcontractors need their own insurance?

Bona-fide subcontractors are not employees of your organisation. Therefore, they should have their own public liability insurance.

However, you will be responsible for checking that their insurance covers at least the same value as your own.

Bona-fide subcontractors vs labour-only subcontractors: what’s the difference?

There are a number of key differences between labour-only and bona-fide subcontractors. Knowing the difference between these two classifications can help you protect your business.

Payment terms

There are various ways in which a BFSC can be paid:

  • a lump sum on completion of the work
  • staged payments when sections of the project are complete
  • in agreed instalments

In comparison, a LOSC is normally paid hourly, daily, or weekly.

If there is a problem with the work of a BFSC, it is their responsibility to fix it without you incurring any additional costs. However, there is no guarantee with the work completed by a LOSC.

A subcontractor is expected to pay their own self-employment taxes and NI contributions. If they haven’t, you will be liable for any outstanding debt owed. Register for the Construction Industry Scheme (CIS) to avoid this pitfall.


When taking on subcontractors, you should first contact your insurance provider to check there are no implications to your policy..

A LOSC will need to be included on your employers’ liability insurance. This is because they’re classed as employees while carrying out work for you.

By contrast, a BFSC will need to have their own insurance and indemnity policies in place. Check they have public liability insurance with a level of indemnity that’s not less than your own.

They should also have the relevant insurance cover for their own employees (employers’ liability insurance)As well as the tools, equipment, and materials they bring onsite.

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While a BFSC works under their own supervision, a LOSC will need an element of supervision from you (or a member of your team).

It’s up to you to tell them their working hours, their work location, and their daily tasks.

You will need to make sure a LOSC follows your health and safety policies and procedures. Conversely, a BFSC will be responsible for their (and their team’s) own health and safety.

Other considerations

Whichever route you choose, if you hire a subcontractor, you must register for the CIS. It is compulsory under UK law.

This means that all payments from contractors to subcontractors are accountable. Contractors are required to make deductions from cash-in-hand payments to subcontractors to pay tax and National Insurance to HMRC.

A written contract is advisable. This should outline:

  • The work that’s expected of the subcontractor
  • The time period within which the work should be completed
  • The amount you’ve agreed to pay

If you’re working with a BFSC on a larger project, you can have a legally binding subcontractor agreement drawn up by a solicitor.

For more information, read our guide to choosing the right subcontractor for your business.

Quick summary on bona-fide subcontractors vs labour-only

Labour-only subcontractors are ideal if you need greater flexibility. LOSC work at your discretion, so you set the hours, the work schedule, and the work location.

You will, however, need to add any LOSC to your insurance policy. This will ensure you’re covered should there be an incident on site.

There is no guarantee with LOSC. So, if the job isn’t done to a high enough standard, or they don’t show up, it’s an additional headache for you.

Bona-fide subcontractors (BFSC) are normally better suited to larger projects and will quote for a job upfront.

They often bring specialist skills to the project that you might not have within your own business. They work under their own supervision, set their own schedule, and are fully responsible for the completion of their part of the project.

The additional benefit of a BFSC is that they need their own insurance

For example, public liability, employers’ liability, and insurance for their tools and materials.

It’s crucial you understand the difference between the two types of subcontractors, if only for the insurance implications.

If the tradespeople subcontracted to your business aren’t covered by the correct insurance, you leave yourself open to potentially costly claims.

Until you’ve built a trusted bank of tradespeople, there’s naturally going to be an element of risk associated with subcontracting work:

  • Will they complete the job to the same high standards as your business?
  • Will they turn up when they’re meant to?
  • Will they be available when you need them for future projects?

One way our tradespeople reduce this risk is to contact other certified members through the Checkatrade network.

How using other Checkatrade members is less risky

Checkatrade members are checked and checked again (a gruelling 12 times). So, you can be assured you’re enlisting the services of genuine, hard-working tradesperson, just like you.

Get your business on Checkatrade, and then give the search a try. Whatever professional you’re looking for and whatever location, you can see how homeowners have rated them, and hire them to work with you.

Join and keep growing your business

8/10 people would choose a tradesperson we've checked over one we haven't*.

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Content disclaimer: This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer here.

*Deep Blue Thinking 2021 Trade Perception Survey.

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