NEC Option C - Target Cost - Schedule of Cost Components 1 - People

We are having a discussion with the Project Manager of the project I am working on over the recoverable Defined Cost under SCC 1 - People Clause 1.13(i) - meeting the requirements of the law.

We hold the view that, as it is a legal requirement, the cost of providing Employer’s Liability and Public Liability Insurance is recoverable under this provision of the SCC.

Would you please advise if we are correct in our opinion and also advise what other elements of cost would be recoverable under this provision.

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Firstly any such payment must be made in relation to People, which in the case of s13 would be payments made for directly employed People.

Employer’s liability insurance is a statutory requirement originating from the Employer’s Liability (Compulsory Insurance) Act 1969, with the minimum cover currently set at £5m for any claim. As this insurance specifically relates to the employment of People, it would be reasonable to assume that it is also a ‘cost to employ’ so could be included, notwithstanding the difficulties of assessing a cost per person.

Public Liability Insurance is one of the stated insurances in the Insurance Table and, although it is a contractual requirement, it is not a statutory requirement. Consequently it would not pass the test of ‘meeting the requirements of the law’, even before you try to establish a link with the ‘cost to employ’.

It is interesting to note that the corresponding wording under NEC4 changed to ‘contributions, levies or taxes imposed by law’, which would more appropriately describe what the sub-clause is intended to cover. This would account for financial matters such as; Employer’s National Insurance contributions, and the Apprenticeship Levy (for qualifying companies). At certain times this could have included the CITB Levy, where it was calculated using People as the basis, although there have been numerous changes to the calculation methodology over recent years.

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