Engaging contractors : Information and details to collect from your contractor

• This insurance covers a business against claims for personal injury to third parties and damage to property owned or controlled by someone else.
• Although it is not a mandatory insurance for contractors to hold, in the building and construction industry it is an important risk for businesses to insure against.
• HIA strongly recommends that builders make public liability insurance a condition of engagement and seek evidence of the policies.
• Ensure the insurance policy has adequate coverage. For example, HIA Trade Contracts require at least $5million for public liability insurance coverage.

Workers compensation Insurance

(covers the contractors' employees)

• Workers compensation insurance is required where the contractor is an incorporated entity (company- Pty Ltd/ Ltd) or where the contractor has its own workers (e.g., sole trader with employee/s or workers. Note: the insurance covers the employee/workers, not the individual who is sole trader.)
• Where such insurance is required, your subcontractor should provide a subcontractor statement to declare they have the insurance in place and provide evidence (certificate of currency).
  • Note: Contractors that operate as individuals on ABN, paid on a time basis, work exclusively for you, and under your direction are more likely to be seen as a worker than an independent contractor.

If you employ contractors who are deemed to be a worker, you need to ensure that you have workers compensation insurance and you provide an estimate of your annual wages bill to icare.

Personal accident/ sickness Insurance / Income protection insurance

(covers sole trader contractors)

• Self-employed contractors who are not incorporated (company) are not eligible for workers compensation. HIA recommends that contractors take out cover for accident and sickness through a private insurer to provide financial compensation while they are unable to work.
• Be aware that if your contractor is deemed to be an employee, they may still be eligible for workers compensation, even if they hold private insurance coverage.

• A licence is required:
  • where residential building works are being performed by a tradespersons (works over $5,000);
  • for all specialist works (electrical, plumbing, gasfitting, air-conditioning, refrigeration), regardless of value.
• You can only contract to perform, supervise or carry out works as specified by your licence. Penalties may apply if you perform works outside of your licence scope.
• NSW Fair Trading sets out the works that can be carried out by each licence category.
• Ensure that the licence matches the business entity (if the business is a company or partnership, there should be a licence in the name of that business, not the individual’s (director/ partner) name). To check a licence go to Verify licence.

Safety Induction/ White Card

(General Construction Induction Training Card 

• Anyone performing construction work must have undertaken the general construction induction training and will have been issued with a construction induction card (or white card)
• Check contractor holds card and maintain details (as evidence that you’ve met your duty). Checks can also be made online at Verify licence.

• If engaging contractors to perform works that are considered high risk, a licence may be required – these works include dogging, rigging and scaffolding; use of cranes; hoists; forklifts; and pressure equipment.
• Check licences for asbestos removal and demolition (as regulated by the Work Health and Safety Act 2011).
• The above licences can be checked at Verify licence.

Safe Work Method Statements

(SWMS)

• Where high risk construction work is being undertaken, a SWMS should be provided and kept till the end of the job.

• The use of written trade contract is an important part of the contractor risk management process. A written contract sets out key terms such as payment, insurance, processes for variations and rectification of defects.
• HIA has trade contracts available here, or through Contracts Online that set out the following detail:
  • parties details;
  • site details;
  • scope of works and contract price (best to have a fixed fee for fixed result, hourly rates should be avoided; materials costs should be shown in a quote);
  • terms and conditions setting out progress stages, payment terms, job completion time, variations procedures (good practice that these are authorised in writing), delays, defects periods, etc.
  • terms setting out that contractor takes responsibility for the work and has control over how it’s done (rights to sublet /delegate work)

• Statutory warranties under the Home Building Act 1989 apply to contractors – these are promises about the work (will be done with due care and skill, will comply with plans, specifications, BCA, etc.).
• If there is a breach of the warranty, claim can be made against contractor (as builder, you have contract with the homeowner and would need to rectify the breach - you may seek assistance from the contractor at the time or pursue them for costs if had to remedy the breach).

• Ensure all contractors have a valid ABN. If your contractor fails to cite a valid ABN then by law you must withhold 46.5% of the invoice and remit to the ATO.
• An ABN does not always mean that the contractor is registered for GST. If not registered, the contractor cannot charge GST and should not use a ‘tax’ invoice.
• Check your contractor business details via:
  • ABN Lookup – provides details of ABN holders and whether they are registered for GST;
  • ASIC Connect – provides information of Australian companies

• Be aware that contractors may issue a security of payment claim, in which case you need to respond within 10 days