Subcontractor or 'Employee'?

[norty303]

I know its been a topic of some debate here periodically, but its usually from the perspective of the persopn being 'employed'.

 

I'm a part time sole trader (I have a full time 'real' job outside the industry) and I usually offer my services 'solo'. I have PLI but no employers liability insurance.

 

However, next year, I may need to get in another person to assist on a job. This is laser work, so they'll be required to be competent in their own right/knowledge, rather than just mashing buttons. They 'may' need to supply some of their own kit in terms of control gear too.

 

So, my question is, if I 'employ' this person as a sub-contractor, where do I stand with regard to ELI, do I now suddenly need to have employers policies in place for everything I do?

 

What about PLI, they have their own, but will they need to be covered under mine?

 

For a single job, I can imagine sorting some ELI, but it might be that it's simply not worth expense and time investment to bother doing, which would be a shame. Unfortunately, I simply can't be in 2 places on a site simultaneously.

 

I get subbed by other companies to come and provide services and kit, and its never really even come up (I just send an invoice, they pay), but the discussions on BR make me curious whether it should have. I simply want to buy in some expertise for the event.

 

Appreciate any advice you can give, especially any 'real world' experience.

[Shez]

So, my question is, if I 'employ' this person as a sub-contractor, where do I stand with regard to ELI, do I now suddenly need to have employers policies in place for everything I do?

You don't employ them, you contract them. In the same way as other companies contract you. And just as you have to cover your own back when you're contracted, this person needs to cover their own back too.

[paulears]

if you take out employee insurance, then you'd have a very tricky job to explain why you didn't also take PAYE and NI? If they are not employees, then no need for the employer insurance, because you aren't?

[kerry davies]

Talk to your broker, and then to a different one. I was in a similar position to you and had ELI because I was "instructing and supervising" the persons in the manner of their work. They were self-employed or casuals but you don't even need to be paying someone for ELI to be possibly necessary.

 

There are conflicting opinions on this, Paul, think of the difference in HMRC definitions of "employer" and the HSE definition. They are not necessarily the same thing. For instance HASAWA does not apply to volunteers yet HSE "expect" you to treat them the same as "employees" so even in voluntary work there is an employer-employee relationship which some insist means ELI is essential. Others may well think differently.

 

Just for example I paid more than most with all the usual suspects once I said; "Production Manager". Be sure, be safe.

[norty303]

I was in a similar position to you and had ELI because I was "instructing and supervising" the persons in the manner of their work. They were self-employed or casuals but you don't even need to be paying someone for ELI to be possibly necessary.

 

Thank you Kerry. It was one of your previous posts I believe that had my brain ticking the way it was, and I was [secretly] hoping you'd respond here.

 

Your perspective of HSE vs HMRC is exactly what I was referring to, albeit unknowingly.

[Junior8]

The other thing to remember is the risk of being the 'last man standing' in a situation where there are multiple insurers arguing the toss about a claim. Better to be safe than sorry

[paulears]

Kerry - you might just have explained something - I frequently say production manager - I never realised it was loaded, quite the opposite, I thought. It could explain some increases in things like my home insurance?

[stories]

So, my question is, if I 'employ' this person as a sub-contractor, where do I stand with regard to ELI, do I now suddenly need to have employers policies in place for everything I do?

 

 

As Kerry mentioned, HMRC and the rest of the government don't seem to have the same opinion of what an "employee" is (would be nice if they would all sing from the same him sheet....), let alone the insurance industry etc (HMRC are only interested in recovering tax they believe should have been paid... not any issues of liability and responsibility etc).

 

As I understand it: If you are employing or engaging someone else, it's best idea to have ELI (as you will usually be directing what work they do to some degree in this industry, so if they say injury themselves carrying out tasks you are directing, would possibly have a claim against you directly), but it is not 'required' by law (my understanding, and maybe also be different if you were a Limited Co?? Where directors have certain legal responsibility)? Only an 'issue' if your client is asking for you to have it, at the end of the day it is your risk to assess vs the cost vs the frequency (I would suggest for the odd once or twice a year needing an extra specialist sub-contractor, most people probably wouldn't bother and bear the risk themselves as it's just not financially viable to the small business, and a skilled industry professional should be a low risk).

 

I would though think most 'freelancers' should really have ELI as they no-doubt direct the actions of others while on site (e.g. telling local crew what they can do to help / how to hang a speaker etc). Another of our grey areas? Obviously thats a separate debate in it's self.

 

 

-s

[norty303]

Hmm, I think we're getting into the realms of multiple insurances to cover the same thing. I certainly wouldn't expect to have insurance to cover people from other companies/organisations that I'm working alongside, regardless of whether for some aspects they might be advising me of a course of action or vice versa.

 

Equally, I would entirely expect local crew to be covered by their agency or the venue directly, as their 'employee' or 'engager' (perhaps a more appropriate term, to differentiate from the HMRC definition). I can engage someone in work without being their employer.

 

As it is, no local crew will ever touch my laser gear (over my dead body!) so its a moot point ;)

 

 

As you quite correctly point out though, if the client demands it, ELI shold be held for all 'employees'. And my scenario is one of those, hence why I'm trying to establish if I 'am' an employer for these purposes, because I'm going to need to load the price to cover the one-off ELI cover for the event. As you also point out, it could price me out of the running.

[stories]

Hmm, I think we're getting into the realms of multiple insurances to cover the same thing. I certainly wouldn't expect to have insurance to cover people from other companies/organisations that I'm working alongside, regardless of whether for some aspects they might be advising me of a course of action or vice versa.

 

.......

 

As it is, no local crew will ever touch my laser gear (over my dead body!) so its a moot point ;)

 

Your insurance is not covering other people, it's covering liability's you have that may arise from your actions or instructions(depending on the insurance).

 

I think your missing my point there, I only used local crew in my example as that illustrated my point a little more clearly. If you were say to direct your 'freelancer' to hang your lasers in a certain way, ladder required to do so and (s)he falls off your ladder and injures them self badly, while carrying out your instructions, who are they going to try and make a claim against? Does your PLI cover such a claim?

 

-s

[norty303]

Your insurance is not covering other people, it's covering liability's you have that may arise from your actions or instructions(depending on the insurance).

 

Absolutely, I get that. However, just because I advise/ask someone to do something, doesn't mean I'm their employer for insurance purposes. Local crew should be covered by their employers ELI, regardless of what I ask them to do. 'My' freelancer is a different kettle of worms in this respect.

 

The significant point here is whether 'my' freelancer would be responsible for their own actions and safe ladder use (as I am when I'm contracted by a client), and covered on their own personal injury policy (as I possess), or whether I have to have that cover, as the person who 'engaged' them. Otherwise, we're into a situation where any client who wants to engage me, and asks me to put lasers where they want them, should have ELI to cover me and my actions (which patently they don't).

[kerry davies]

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.

That is the paragraph which is open to interpretation. Self-employed sub-contractors are not required to be covered by ELI if; they can provide substitutes, are clearly in business for their own profit, they do not work exclusively for you or you do not pay NI and tax for them. But then it blows it wide open again by saying;

. However, even if someone is self-employed for tax purposes they may be classed as an employee for other reasons and you may still need employers’ liability insurance to cover them

It get's worser;

In some cases you will not need additional employers’ liability insurance for volunteers or for:

students who work for you unpaid;

people who are not employed, but taking part in a youth or adult training programme;

or a school student on a work experience programme.

Insurers will usually cover the above under an existing employers’ liability policy, and there is generally no need to inform your insurer if you take on any of the above.

However, you should talk to your insurer if you take on the above either for long periods, or if they are doing work that is not your company’s usual business, and you should bear in mind the level of risk they may be exposed to during the time they are working for you

So volunteers and students CAN be "employees" as well for ELI purposes.

 

Since it is a legal necessity to have ELI, under the 1969 Act it is a matter of legal interpretation. You need to get expert advice.

If you do not currently have any employers’ liability cover you should talk to your insurer before taking on any of the above.

[norty303]

Thanks so much for all of that Kerry. Clearly I'm not just being a bit dim here.

So, the problem now is getting some impartial advice - asking an insurance company whether I need to buy their product seems a little loaded in their favour.... :unsure:

 

I'll try Doodson as they do my PLI already.

[Jivemaster]

From the pov of contract law, if the contract you have you will execute including sub by contracting, then you being liable for your execution of the contract will have liability for the parts that you subcontract.

[norty303]

Well, yes, I'll have liability for ensuring the quality and compliance of the services I've been contracted to supply, even the parts I may sub-contract out.

But I'm not sure that has any implication on me being their employer.

A large organisation subcontracting services to another large organisation doesn't become responsible for the ELI of the subcontracted organisation. Does it change when smaller orgs are involved, or more specifically 'freelancers'?