Many contractors and subcontractors work in fields where serious accidents can happen, which is why many have certain insurance requirements.
Insurance is a key component for businesses to protect themselves – most notably through public liability insurance which covers them for injury to others. But what about injury to themselves?
While contractors and subcontractors can come in many forms, most are tradesmen, and injuries like muscular stress and traumatic joint injuries are a common occurrence when doing such physical work.
That’s where workers’ compensation insurance comes in. We hear the questions all the time: Is WorkCover mandatory? Are contractors and subcontractors covered by WorkCover? Do subcontractors need a WorkCover policy?
Essentially, if you’re considered a “worker” under the Workers’ Compensation Rehabilitation Act 2003, your workplace is required to cover you by taking out a workers’ compensation insurance policy.
Figuring this out can get difficult. Let’s explore further how to cover yourself (and others) if you’re a subcontractor.
To do this, we explain the meaning of contractor and subcontractor, and define who is a “worker” in the eyes of WorkCover Queensland.
Do contractors need to be covered by the principal hirer for workers’ compensation insurance?
In Australia, most contractors and subcontractors are typically “workers” when executing work on behalf of a business.
But if you’re a contractor providing one-off work, or work under a “contract for services”, your workplace (or the people hiring you) are not likely to be required to take out a workers’ compensation insurance policy for you.
This may vary though if you’re engaging in ongoing or contracted work under a “contract of service” (whether an employee or not).
The difference is whether it’s an employee-employer relationship or a contractor-client relationship – only the former requiring the person responsible for engaging you to take out a WorkCover policy, unless the person is deemed a worker.
When does workers’ compensation need to be provided for subcontractors?
If you’re planning on, or are doing contract work, it’s important not to assume that your subcontractors must have their own insurance.
This is because in certain circumstances subcontractors actually do need to be provided with a workers’ compensation policy through the employing contractor (regardless of if they have their own ABN and oversee their own taxes).
Like we said before, it all depends on whether the subcontractor is considered a “worker” under the law – which in most cases they are, because they’re usually hired to do a job under a contract of service.
Take this example for to get an idea:
Jane engages a sole trader, Richard, to carry out data analysis and generate reports. Richard has an ABN and provides a quote for the work. Under the contract, he can engage others to carry out the work. Richard’s contract also provides that he is responsible for defects in the work. In this scenario, Richard is a contractor. Jane would not have to cover his services by her WorkCover policy; however, Richard would have to do this for any subcontractors he engages.
If you’re uncertain there are tools that can help you determine your classification like the ABN Lookup tool, or the ATO’s employment/contractor decision tool.
When do subcontractors need their own insurance?
While the contracting company is generally responsible for your workers’ compensation insurance, hiring companies may require you to hold some form of accident and liability insurance.
A lot of subcontractors get the impression they don’t need to take out public liability insurance because they assume the hiring company’s policy will protect them. But unfortunately, unlike workers’ compensation insurance, that’s usually not the case.
Since subcontractors have a separate business, they’re responsible for their own actions and therefore expected to have their own policy.
In fact, some companies won’t allow you onsite without it, because even though it’s not compulsory (and it won’t cover your own property damage or injury), it will protect you financially if you’re found to be liable for causing damage to property or injuring someone else.
Currently, the minimum amount of public liability insurance in Australia is $5 million. But generally speaking, the higher the risk of a claim, the higher the policy amount will be.
In summary, insurance can be a lifesaver for employers, employees and workers of any kind. It’s important to know when you need it, who’s responsible for providing it – just like knowing who to report incidents and unsafe workplaces to and keeping safe on the job.
