Insurance and contractors: have you got it covered?

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Hiring a contractor or sub-contractor is often appealing to time-poor, cash-strapped small business owners. One big reason is that they take care of their own insurance (as opposed to the business owner having to provide coverage for them, as is the case with employees). But what if things aren’t quite that straightforward?  

Imagine the following scenario. You hire a plumber to fix a leak at your workplace. He solders a pipe and your building catches fire. What was a $200 job results in $1 million in damage. You go after the plumber only to discover he doesn’t have the right (or any) insurance or assets you can get your hands on. If you have the right property insurance you may receive a pay-out. But what if it only covers you up to $500,000? Chances are you’ll be left with a shortfall and that could sink your business.

“It’s crucial for small businesses to check that contractors and sub-contractors have their own insurance in place. You should request a copy [of the policy]”, says John Clark, Steadfast Broker Support Manager.

What policy? Well, that depends on the job but a humble suburban tradesman will often have contract works, public and products liability, professional indemnity and workers’ compensation insurance. Err on the side of caution when checking that any contractors or sub-contractors you use show you all the relevant policies to provide proof, so you are unlikely to be left on the hook if they, or one of their team, starts a fire or falls over and breaks a leg.

” It’s crucial for small businesses to check that contractors and sub-contractors have their own insurance in place. “

Employee or sub-contractor?

It’s a question that causes confusion but one that business owners need to be clear about to avoid insurance issues in a worse-case scenario.

In theory, an employee works in the business while sub-contractors run their own business and supply a service. For example, the wait staff at a restaurant are likely to be employees while the person who cleans it (and provides similar cleaning services to other restaurants) is likely to be a contractor or sub-contractor.

In practice, the lines can blur. For example, a person can be a contractor for tax purposes but still be deemed an employee when it comes to workers’ compensation insurance. If someone a business owner thinks is a sub-contractor can be classified as an employee (under any circumstances), that business owner has a lot more liability than they realise, should anything go wrong.

Each state and territory has its own rules around the demarcations between employees and contractors/sub-contractors for workers’ compensation, so checking the relevant websites is a good place to start. Then seek legal advice if you’re worried you might have an employee on your hands rather than a contractor or subcontractor.

Workers’ compensation and public liability

Workers’ compensation insurance is compulsory for all employers in Australia to protect employees if they suffer a work-related injury or illness. The same goes for sub-contractors who hire workers to help with a job. “If you employ people, get advice as to your workers’ comp obligations in your state or territory,” says Clark.

So, what should you look out for?

As with most things business – related, it’s always best to get it in writing. That is, have any contractors or sub-contractors you use sign a contract before they step foot on the premises. Contracts need to be properly drafted and spell out the chain of liability, to give both parties legal protection. All parties – employers, contractors and sub-contractors – should pay special attention to indemnity clauses that can shift all liability for death, injury or loss onto them.

“People often rush in and sign a contract without looking at it carefully. If you go on to make a claim your insurance might not cover you because you signed something you shouldn’t have,” says Clark.

One common but important exclusion is contractual liability. This can exclude insurance cover if you sign a contract that reduces your rights to less than they normally would be at common law (for example, if you agree in a contract not to sue a contractor for their own negligence).

If you’re an employer or sub-contractor who wants some expert guidance about insurance matters, talk to a Steadfast insurance broker today.

Workers’ compensation is everyone’s business

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Business owners are required to navigate the complex world of workplace safety. Here’s some things you need to know to ensure your business is compliant.

Injury in the workplace

Illness or injury in the workplace is more common than you might think. No matter what industry you’re in, it’s an area of running a business that can’t be ignored.

The statistics speak for themselves. There were 106,565 serious workers’ compensation claims in 2013/14, which equates to 5.9 serious claims per million hours worked, according to Australian Workers’ Compensation Statistics data from Safe Work Australia. The economic cost of work-related incidents in 2012/13 was $61.8 billion, statistics show.

The three industries with the highest number of serious claims per million hours worked were transport, postal and warehousing (9.3%), healthcare and social assistance (8.7%), and agriculture, forestry and fishing (8.6%) in 2013/14.

Most of the injuries during this time were musculoskeletal disorders, which led to 90% of serious claims – the most common were traumatic joint/ligament and muscle/tendon injuries (45%). While claims are down on previous years, businesses still need to be prepared, just in case.

“ Wise employers foster a health and safety culture within the workplace “

Protect your business

The onus is on Australian business owners to navigate the complex world of workplace safety, which includes understanding workers’ compensation requirements. Workers’ compensation insurance is compulsory for business owners in all states and territories.

” Workers’ compensation insurance is compulsory for business owners in all states and territories. “

This form of insurance pays employees if they are injured at work or become sick due to their work. The payment can cover their wages if they’re not fit to work, medication expenses and rehabilitation.

Employers are responsible for taking reasonable steps to ensure that the workplace is a safe working environment, which extends to events where employers are technically off the clock, such as work Christmas parties.

Uninsured employers may still be able to claim for workers’ compensation benefits for staff in case of injury or illness, so check with your local authority. There’s lots of great information on the Safe Work Australia site.

Each state and territory has independent regulators and administrators in place to run workers’ compensation, so make sure you become familiar with your local authorities. The rules while similar differ between each state and territory

Managing risks

Wise employers foster a health and safety culture within the workplace, providing regular communication around safety and injury management to raise awareness among staff.

This process includes encouraging staff to identify potential injury or illness threats, and being sure to address these issues immediately. Rewarding positive contributions to health and safety in the workplace can also have a significant impact on the cultural change within an organisation.

Taking immediate action after an incident to minimise effects and make sure people are supported is paramount.

Make sure your workplace has emergency response plans for evacuations and medical response systems in place. Be sure to conduct an investigation to understand how the incident occurred and document everything, including taking photos of where the incident occurred and then take steps to prevent it from happening again.

The steps to planning ahead

Efficiently managing work health and safety risks within a workplace means having a systematic approach, which involves five key elements. These are:

  1. Governance: Ensure your workplace has the organisational framework, procedures, policies and processes in place
  2. Prevention: Develop specific hazard policies and procedures for your workplace
  3. Response: If a safety incident takes place, you must take steps to remove the hazard that caused it, and implement changes to stop it from happening again
  4. Managing hazards: An effective risk and hazard management methodology will allow you to identify hazards that pose a risk to your workers and resolve them before they cause injury or illness
  5. Recovery: Where a worker has been injured, the employer has responsibilities to put in place a rehabilitation management system for workplace injury or illness

Source: Comcare.gov.au

Tips to foster a health and safety culture:

  • Clear communication: The flow of information ensures everyone knows what’s expected of them and what they can expect at work. That means the work gets done safely
  • Talk it up: Enthusiasm about health and safety will save you money in the long run
  • Reduce risk of injury: Think, plan and invest in systems to reduce the risk of injury to keep workers safe

Source: Safe Work Australia and South Australian firm, Williams Seafoods

This is an area of business that’s important to take seriously. Even if you’ve dealt with this area of your business six months ago, it’s important to revisit safety issues regularly, so make sure you schedule regular audits, and include your staff in the process.

For more information and tailored advice, speak to your Steadfast insurance broker who can advise you on your workplace health and safety risks.