If you use subcontractors in your trade business, you already know how valuable they are. They help you take on more work, cover the gaps when things get busy and give your business the flexibility to say yes when a big job lands in your lap.
But here’s a question worth asking right now: do your subbies have their own insurance?
Because if they don’t, and something goes wrong on your job, you could be the one left holding the bill. And depending on the size of the claim, that’s a cost that could seriously threaten everything you’ve worked to build.
This is one of the most common and most costly assumptions we see in trade businesses. The subbie thinks they’re covered under your policy. You assume they have their own. Nobody checks. And then something happens.
Let’s fix that.
Why Your Policy Doesn’t Cover Them
Your public liability insurance covers your business activities. It does not automatically extend to cover the independent actions of a subcontractor working on your job. Subcontractors are considered separate businesses in the eyes of insurers, and they are expected to carry their own cover.
According to one insurance company, the main contractor’s public liability insurance will generally not cover a subcontractor in the event of a claim. If a subbie causes property damage or injures a third party while working for you and they have no insurance, the claim will likely come back to you.
That’s not a risk worth taking.
What Insurance Should Your Subbies Have?
The specific requirements will depend on the type of work and your industry, but for most trade businesses there are two key policies to check before anyone starts work.
Public and Products Liability
This is the non-negotiable one. Every subcontractor working on your jobs should hold their own Public and Products Liability insurance. The current minimum in Australia is $5 million, though many commercial contracts and larger sites require $10 million to $20 million, so always check what your contracts specify before assuming the minimum is enough.
Before your subbie starts work, ask to sight their Certificate of Currency. This document confirms they’ve paid their premium and shows exactly what activities they’re covered for. If they can’t produce one, that’s your answer.
You should also ask them to note you as a “Principal” or “Interested Party” on their policy. This provides you with a level of protection under their policy in situations where you’re brought into a claim as a result of their actions while working on your job.
Workers Compensation
This is where it gets a little more complicated, and where a lot of business owners get caught out without realising it.
If your subcontractor operates as a company, they are legally required to hold their own workers compensation policy covering their employees for workplace injuries including medical costs, rehabilitation and lost wages. Straightforward.
If your subcontractor is a sole trader or partnership, it’s a different story. Sole traders and their partners don’t qualify for workers compensation themselves. If they have employees of their own, those employees must be covered. But the sole trader personally is not covered under that system.
Here’s the part that surprises many business owners: in certain circumstances you may actually be liable for a workplace injury sustained by a sole trader subbie, and you may need to include them in your own workers compensation declarations.
This can apply if you pay them an hourly rate, pay them weekly or fortnightly like other employees, supply them with a uniform or tools, or require them to work regular and defined hours for you. In these situations they may be classified as a “worker” under the relevant Workers Compensation Act in your state, which changes your obligations significantly.
If you’re not sure how your subbies are classified, your state workers compensation authority can help you work through it, and it’s always worth a conversation with your insurance broker before you assume you’re in the clear.
Subcontractors Statements
Where your subbies are responsible for managing their own insurance and compliance obligations, it’s worth having them complete a Subcontractors Statement before they start work. This is a formal declaration confirming the subcontractor has met their obligations under the Workers Compensation Act, Payroll Tax Act and Industrial Relations Act.
Why does this matter to you as the principal contractor? Because without it, you can potentially be held liable for unpaid workers compensation premiums, payroll tax and employee entitlements. It’s a simple document that can protect you from a significant and entirely avoidable cost.
A Quick Checklist Before Any Subbie Starts Work
Before your next subcontractor sets foot on your job, run through these:
- Have you sighted their Certificate of Currency for Public and Products Liability?
- Does their coverage amount meet your contract requirements?
- Have they noted you as a Principal or Interested Party on their policy?
- Have you assessed whether workers compensation obligations apply to your arrangement?
- Have you collected a Subcontractors Statement where required?
It takes ten minutes to check these things. It could save your business.
A Note on Getting Advice
Insurance requirements for subcontractors can vary depending on your state, your industry and the specific nature of the working arrangement. What applies in NSW may differ from what applies in Queensland or Victoria. This article is a guide to help you ask the right questions, but it’s not a substitute for advice tailored to your specific situation.
If you’re not sure whether your current setup leaves you exposed, speak to a qualified insurance broker who works with trade businesses. The right advice now is far cheaper than finding out the hard way later.
Want to Talk About This With Other Tradie Wives?
This is exactly the kind of topic that comes up in our community all the time. If you’ve navigated subcontractor insurance in your own business or you’ve got questions about where you stand, come and join the conversation at tradiewives.com.au. You’re not the only one figuring this out, and chances are someone in our community has been exactly where you are.
This article is intended as general information only and does not constitute legal or financial advice. Insurance requirements vary by state, industry and individual circumstances. Always consult a qualified insurance professional for advice specific to your business.
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This article is intended as general information only and does not constitute legal or financial advice. Insurance requirements vary by state, industry and individual circumstances. Always consult a qualified insurance professional for advice specific to your business.
