|Public Liability Insurance |
- This insurance covers businesses 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 seek evidence of and make public liability insurance a condition of engagement.
|Workers Compensation Insurance |
- Workers comp 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).
|Personal accident/ sickness Insurance / Income protection insurance |
- Because as a general rule self-employed contractors 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.
- To minimise the risk of injured contractors attempting to claim through workers comp, builders can make it a requirement that the contractor maintains this insurance. (Note: the fact that a contractor holds and maintains this form of insurance does not necessarily mean that the contractor would or could not be deemed your worker.)
|Contractor licence ||A licence is required:
Make sure you check:
- where residential building works are being performed by a tradespersons (works over $5000)
- for all specialist works (electrical, plumbing, gasfitting, air- conditioning, refrigeration), regardless of value.
- 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).
- that the licence has not expired and covers the category of building work / trade that you are engaging the business to perform (penalties can apply to a principal/ builder who engages contactors who are unlicensed or working outside their licence scope).
|Safety Induction/ White 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).
|Safety licences (high-risk works) |
- 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).
|Safe Work Method Statements (SWMS) |
- Where high-risk construction work is being undertaken, a SWMS should be provided and kept until the end of the job.
|Written contracts |
- 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 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 the 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 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, can make claim 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).
|ABN, GST |
- 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.
- Can check ABN and whether registered for GST by checking ABN Lookup.
|Payments (SOPA) |
- Laws exist regarding payments to contractors. By law payment terms cannot exceed 30 days.
- You should always check whether an invoice from a contractor is a payment claim under the security of payment laws (there will usually be a note on the invoice that it is a payment claim under the Building and Construction Industry Security of Payment Act 1999 – but not always. Invoices are taken to be a payment claim under this Act where the works are not residential building works).
- If a payment claim is issued, there is a formal procedure and strict timeframes in terms of responding to the claim (and giving reasons if not intend paying the amount in the claim).