21 Aug Guest Blog – Do Subbies Need Their Own Insurance?
If you hire sub-contractors in your business, they can be a god send. Often getting you out of a tight spot or saving your bacon if you get a flood of work coming in all at once. Contractors are self-employed though and they need to have their own insurance.
Unfortunately, many may not. They may think they are covered by you, but this is not the case and if their negligence results in property damage or personal injury to a third party, chances are you’ll be left with a cost and that could sink your business.
Being in the insurance game for over 17 years, I commonly see business owners making assumptions with their sub-contractors’ insurance requirements and leaving themselves exposed to claims.
What policies should you check for?
It does depend on the industry and job, typically, Public and Products Liability and Workers Compensation.
Public and products Liability
Having Public and Products Liability is essential and you should sight their Certificate of Currency which confirms they have paid the premium. It will also tell you what activities they are insured for. You should also have them note you as a “Principal” or “Interested Party” on their policy. This will provide a level of protection for you under their policy, where you may be sued due to the negligent actions of your sub-contractor whilst carrying out contract services for you.
If your sub-contractor is a company, they legally must have their own workers compensation policy. This will provide cover for workplace injuries sustained by their own employees – medical costs, rehab costs and loss of wages.
If your sub-contractor is a sole trader (or partnership) it is a little more complicated. Sole traders and partnerships do not qualify for workers compensation – that is, the sole trader or partners themselves. If they have employees, they must have a policy.
In some cases you will be liable for workplace injuries of these sole trader sub-contractors and you must include them in your own workers compensation declarations. Typically, if you pay them an hourly rate, if they are paid on a weekly or fortnightly basis like other employees, if you provide them a uniform & tools, if they are required to work regular & defined hours for you, they will be considered a “worker” under the Workers Compensation Act and you must include them in your own workers compensation declarations.
To determine if contractors are deemed workers, you can use the following test: http://workerstatus.workcover.nsw.gov.au/.
Where sub-contractors are liable for their own policies, you would be wise to have your sub-contractors submit a Sub-Contractors Statement – effectively, a declaration that the Sub-Contractor has paid all its obligations under the Workers Compensation Act, Payroll Tax Act and Industrial Relations Act. The Principal Contractor (i.e. you) may be liable for the payment of the workers compensation insurance premiums, the payroll tax and the entitlements of the employees unless the Sub-Contractor’s Statement is provided.
Of course, there may be other insurance policies for you and your sub-contractors to consider. If you need help or advice or if you want to find a policy that ensures your business is fully protected when using sub-contractors, give us a call on 1300 633 530 or reach out at www.ausuremacarthur.com.au and we can provide an obligation free quotation.