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Do I need workers’ compensation for a contractor?

June 24, 2016

In Australia employers are required by law to provide workers’ compensation to employees, if the need arises.

But what about contractors?

Many people believe that because a contractor is not technically an employee, the person contracting their services does not need to cover them for workers compensation. This is not necessarily the case.

Today, we’re busting myths around workers comp and contractors.

Who must have worker’s compensation?

The Workers’ Compensation and Injury Management Act 1981 (the ‘Act’), states that an employer must provide workers’ compensation cover to anyone they employ, who is defined as a ‘worker’.

According to the Act, a worker is defined as:

• A full-time worker on a wage or salary.
• A part time, seasonal or casual worker.
• Workers on commission.
• Piece workers.
• Family members
• Contractors and sub-contractors (in certain circumstances).

When does a contractor or sub-contractor need workers’ comp cover?

A contractor or sub-contractor is considered to be a ‘worker’ when they are engaged to perform work for the purpose of the other person’s trade or business. They must also be paid for the work they perform.

Here are some examples:

• When a bricklayer or carpenter performs work for a builder.
• When a fencing contractor is contracted by a farmer to fix his property boundary.
• When a painter is contracted by a decorator to paint a client’s home.

What if the contractor employs a sub-contractor?

If a contractor employed by a person (the ‘Principal’) then employs a sub-contractor to complete work, which relates to the Principal’s main business, then the original contractor and the Principal are both liable to cover the sub-contractor for workers’ compensation.

In this instance, the original contractor and Principal are jointly and severally liable. If the sub-contractor contracts to another person, then all 3 of the parties are jointly and severally liable for the final sub-contractor in the chain.

How do I know I am adhering to the Act?

WorkCover WA has a step-by-step guide, which explains how the workers’ compensation scheme works for employers, contractors and anyone deemed a ‘worker’ under the ‘Act’.

We recommend reading through this guide, and if necessary, speaking with a lawyer about your obligations under the ‘Act’.

Need workers’ compensation cover?

Contact our insurance brokers about securing affordable and comprehensive workers’ compensation cover for your business and workers. We will sit down with you and discuss the most effective option for your unique circumstances and your budget.

 

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