LabourBase logoLabourBase Home
Back to blog

Labour-Only Subcontracting: How It Works and How to Run It

Labour-only subcontracting article title card

Labour-only subcontracting means you engage a worker or gang to supply labour while you supply the materials, direction and supervision. That makes you, the contractor, responsible for the people on your site, so the work only goes well if you know who you are bringing on and can prove the hours they worked. With LabourBase you review each worker’s verified qualifications, CSCS card, ratings, attendance record and work history before you hire, then approve their hours yourself, for a flat platform fee of £1 per hour per worker.

This guide is for contractors, subcontractors, site managers and directors who hire labourers and tradespeople. It covers what the arrangement is, how it differs from a bona fide subcontract, what the tax and insurance position looks like, what to put in the agreement and how to manage rates and timesheets.

LabourBase
Hire Labour Directly, With Clearer Records
Review worker profiles and verified qualifications, then manage site attendance and approved timesheets with a flat £1 per hour platform fee.
Visit

TL;DR

  • A labour-only subcontractor supplies labour only. You provide the materials, instructions and supervision, so you carry the responsibility for the work and for safety on site.
  • A bona fide subcontractor runs its own business and decides how the work is done. A labour-only worker follows your direction, and that control is what drives tax, status and insurance questions.
  • CIS verification, deductions and returns apply to payments under the scheme, but CIS does not settle whether someone is self-employed.
  • Check CSCS cards, qualifications and right to work before the first shift, and keep approved timesheets for every hour you pay.
  • On LabourBase you pay workers directly at their agreed rate and pay a flat £1 per hour per worker, with no agency markup.

Table of Contents

What labour-only subcontracting is

The RICS subcontracting guidance note describes a labour-only subcontractor as one who carries out the subcontract works without supplying materials. A main contractor may choose this route when it believes it can buy materials more cost-effectively than the subcontractor. The same guidance notes that groundworks, brickwork and carpentry are commonly let on a labour-only basis.

In practice that looks like this:

  • You buy the bricks, timber or concrete and have them delivered.
  • The labour-only worker or gang turns up, is inducted and gets daily tasks from your site manager.
  • You agree a rate, approve the hours and pay.

The arrangement is common because it gives you control over cost, programme and quality. The price of that control is that you act like an employer in many respects, even though the worker may be self-employed for tax purposes.

Labour-only versus bona fide subcontractors

A bona fide subcontractor is an independent business engaged to complete a defined element of work. It decides how the work is carried out, provides its own labour, tools and equipment, corrects its own defects and normally holds its own public liability and, where it has employees, employers’ liability insurance, as one UK trade guide sets out.

A labour-only subcontractor becomes part of your team. Direct Line for Business describes the contractor as typically setting working hours, location and daily tasks, and being responsible for the quality of the work and the worker’s health and safety on site.

Question Labour-only Bona fide
Who decides how the work is done? You The subcontractor
Who supplies materials? You Usually the subcontractor, or agreed in the subcontract
Who sets daily tasks and hours? You The subcontractor, within the programme
Who is responsible for defects and outcomes? You, as the supervising contractor The subcontractor
Typical payment basis Hourly, daily or weekly rate Lump sum, measured work or agreed package

The label in the contract does not decide the matter. What counts is how the relationship works on the ground. If you direct the work, supply the kit and set the hours, you are running a labour-only arrangement whatever the paperwork says, and you should manage it as one.

Tax and CIS: what applies to you

Most construction work you pay a subcontractor for falls under the Construction Industry Scheme (CIS). The key points for a contractor are these.

Verify before the first payment. You must verify a new subcontractor with HMRC before you pay them. HMRC tells you whether they are registered and which deduction rate to apply.

Deduct at the right rate. HMRC’s CIS manual gives the standard deduction for registered, verified subcontractors as 20%, and the higher rate for those not registered or not matched at verification as 30%. The payment the deduction applies to excludes materials, VAT and the CITB levy. That is one reason labour-only pricing is easy to work out: your labour payments are clearly separate from the materials you buy yourself.

Report monthly. You give the subcontractor a payment and deduction statement and file a monthly return with HMRC. Keep clean records of hours and amounts so these are quick to produce.

CIS verification, deductions and monthly reporting steps

Gross payment status. Some subcontractors qualify to be paid without deduction. VAT compliance became part of the test from 6 April 2024, so the status can be lost by a subcontractor who files late. Check the official CIS guide for the current rules, since HMRC updates it.

CIS does not decide employment status

This is where labour-only arrangements carry risk. HMRC’s guide says the scheme does not apply to employees, and that employment status is determined under common law by the terms of the particular engagement. Being paid under CIS therefore does not prove anyone is self-employed.

A labour-only worker who works under your control, on your hours, with your tools, may in substance look like a worker or employee. One legal guidance note points out that such a person may have rights under the Employment Rights Act 1996 and the Working Time Regulations 1998. It also lists the features of a genuinely self-employed engagement: own tools, a right to substitute, responsibility for the work and no set hours beyond the programme.

If you are unsure how a particular crew should be treated, take advice from an accountant or employment solicitor before you rely on a CIS label. The sensible approach is to decide the status deliberately, document it and keep your records consistent with it, rather than assume.

CIS does not decide employment status

Insurance and liability on a labour-only job

Because you direct the work, you carry much of the liability. The RICS Construction Journal explains that the main contractor acts as labour master for labour-only subcontractors, who work under its direction and control. The contractor is responsible for risk assessments and safe working practices.

For insurance, that means:

  • Labour-only workers are commonly treated like employees. ConstructionInsure explains that their payments should be included in the wage roll declared to your insurer, with employers’ liability cover in place for them.
  • If a client complains about the work, or a labour-only worker is injured, it usually comes back to you.
  • Telling your insurer how many labour-only workers you use, and what you pay them, avoids disputes at claim time.

Talk to your insurance broker about your own wage roll declaration. It is the one number that has to match your payment records.

What the agreement should cover

Even for a short engagement, write the terms down. Useful reference points:

  • Model contracts. The FIS offers members a free model LOSC contract aimed at making responsibilities clear on health and safety, quality, and the payment of National Insurance and income tax.
  • Real-world terms. The Tarmac labour-only conditions (TS2) require competent operatives, compliance with the site representative’s instructions and health and safety rules, CSCS cards and qualifications before work starts, PPE and a site induction.
  • What the price includes. AAR-5 terms state that the sum covers labour, holidays, overtime, small tools, travel and subsistence unless the order says otherwise. Say clearly what your rate covers.

At a minimum, cover:

  1. The parties, the site and the scope of the work.
  2. The rate, how hours are approved and the payment cycle.
  3. Who provides tools, PPE and materials.
  4. Right-to-work, CSCS and qualification evidence before the first shift.
  5. CIS status and the statements you will issue.
  6. Health and safety duties and site induction.
  7. Defects, variations, termination and how disputes are handled.

The RICS guidance adds that the main contractor generally stays responsible to the employer for completing the subcontract works. Your agreement with the labour-only crew does not pass that responsibility on.

Vetting labour before the first shift

Because you carry the responsibility, the quality of the people matters more than the paperwork. Before anyone starts, you want to know:

  • They hold the right CSCS card for the work.
  • Their qualifications and tickets are genuine and in date.
  • They have the right to work in the UK.
  • They have a record of turning up and doing a good job.

This is the part of the process LabourBase is built around. Companies review worker profiles with verified qualifications, CSCS cards, ratings, attendance records and work history before choosing who to hire. The platform also verifies qualifications and right-to-work for the workers on it. You choose your workers, talk to them directly and can rebook the people who performed well, instead of starting again each time you need a crew.

If you are hiring in a specific place, the pages for London, Manchester, Birmingham and other cities show the trades available. For a view of how direct hiring works for self-employed trades, see our page on hiring self-employed construction workers.

Agreeing rates without agency markups

Labour-only rates are usually hourly or daily. Three things keep the numbers honest:

  • Agree the rate with the worker, in writing, before the first shift. Say what it includes: travel, tools, overtime.
  • Separate the rate from any intermediary charge. When a third party sits between you and the worker, you pay a markup on every hour and may not know what the worker receives.
  • Pay only for approved hours. Compare the hours claimed with the attendance record before you pay.

On LabourBase the model is simple. You pay the worker directly at the rate you agreed, and you pay LabourBase a separate flat fee of £1 per hour per worker. There is no LabourBase deduction from the worker’s pay and no percentage on top of the worker’s rate, so the cost of a hire is the agreed rate plus £1 for each hour worked. If you take on a crew of five for an eight-hour day, the platform fee is £40 for the day, whatever the trade or rate.

Managing attendance and timesheets

Timesheets are the evidence behind every payment, every CIS statement and every insurance wage roll figure. A reliable routine has four steps:

  1. Record attendance at the gate. Capture start and finish times on site, not from memory at the end of the week.
  2. Review the draft. AttendIQ’s UK guide describes a workflow in which clock events become a draft timesheet, with breaks deducted and anomalies flagged for the site manager to resolve.
  3. Approve the hours. The site manager signs off what was worked. Payroll or the office then checks rates and totals against the budget.
  4. Pay and file. Pay from the approved record and keep it with the CIS statement.

LabourBase brings labour requests, project allocation, site attendance and approved timesheets together, so site teams and office staff work from the same record. The construction timesheet app with QR site sign-in records who was on site, and you approve hours before paying workers.

Where labour-only arrangements go wrong

Most problems come from a handful of habits:

  • Assuming the CIS label settles status. It does not. Decide status on the facts of the engagement.
  • Skipping verification. A new subcontractor needs verifying before the first payment.
  • Weak vetting. An unchecked CSCS card or qualification becomes your problem the moment someone is on site.
  • Vague rates. Disputes over what a day rate included are avoidable with one line in the agreement.
  • No hours record. Without attendance and approved timesheets you cannot defend a payment, a CIS return or an insurance declaration.

Our view

Labour-only work succeeds or fails on trust you can check. You direct the work, you supply the materials and you carry the responsibility, so you need to know who is on your site and what they have done before.

That is why we built LabourBase around direct hiring. You see verified qualifications, CSCS cards, ratings, attendance records and work history, you choose the people, you agree the rate with them and you pay them yourself.

Our fee is the same for every hire: £1 per hour per worker, charged to the company and kept separate from the worker’s rate. Good crews are easier to rebook when you deal with them directly, and the attendance and timesheet record builds up as you work.

Harry

Hire labour directly with LabourBase

If you need labourers, carpenters, groundworkers or other trades on a labour-only basis, LabourBase lets you review vetted workers, hire them directly and manage attendance and approved timesheets in one place. You pay workers at their agreed rate and pay LabourBase £1 per hour per worker.

LabourBase

For London projects, start with temporary construction labour in London. For a step-by-step view of the process, see how to hire vetted construction workers.

FAQ

Is a labour-only subcontractor an employee?

Not automatically, but the risk is real. Status depends on the facts of the engagement, such as control, substitution and who supplies tools, not on the label or on CIS registration. If you direct the work and set the hours, take advice from an accountant or employment solicitor on how to treat the worker.

Do I deduct CIS from labour-only subcontractors?

Payments for construction work under the scheme are subject to CIS deductions unless the subcontractor has gross payment status. HMRC’s manual gives 20% for registered, verified subcontractors and 30% for those unregistered or unmatched. Materials, VAT and the CITB levy are excluded from the amount deducted from.

Who is responsible if a labour-only worker is injured?

Usually you. The contractor acts as labour master for labour-only workers and is responsible for risk assessments and safe working practices. Tell your insurer about labour-only payments in your wage roll and confirm your employers’ liability cover with your broker.

What does LabourBase charge for labour-only hires?

Companies pay LabourBase a flat platform fee of £1 per hour per worker. The worker’s rate is agreed separately and paid directly to them by the hiring company, with no LabourBase deduction from their pay.

LLabourBase
Discuss Labour-Only Hiring
Get in touch to discuss hiring construction workers directly and managing labour requests, site attendance and approved timesheets.

Sources

Back to blog