Hiring Contractors - With Great Rewards Come Great Risk
Hiring contractors has become commonplace for many organisations to fulfil both varying workloads and skill-specific requirements. In Australia, 23% of employers report engaging contract workers, of which 44% of cases are used in short-term, specialised projects. Now at the same time, the way workers wish to work is changing rapidly. The boundaries between work and everyday life are blurring, and workers are demanding more flexibility, variety and mobility. More and more, it seems that a contracted, contingent workforce is the ideal win-win solution for both workers and businesses alike.
However, while there are many benefits to using contractors, be sure you are fully aware of the risks. Are you confident your contractors are insured, qualified and competent? Are they aware of the specific safety risks involved with your project or site? Can you legally consider them contractors?
By effectively preparing for the engagement of contingent workers in your business, you can enjoy the benefits while minimising the risk. The key is in managing them properly with an appropriate level of oversight.
Know the Risks of Engaging Contractors
As employers, under health and safety legislation, we have a duty to provide a safe working environment. This means eliminating or minimising any safety hazards that exist, including those introduced by your contractors.
Engaging contractors brings certain risks:
Minimal knowledge of your business and its safety management systems
No long-term commitment to your business or its vested interests
Not part of your company's safety culture
Specialist work may not be subject to the same supervision and controls
Often hired based on skills rather than safety practices
Just remember, you have exactly the same duty of care to protect their health and safety as you would if they were a permanent employee.
Are your Contractors Insured?
No one needs reminding of the old adage of Murphy’s law, "Anything that can go wrong will go wrong". As much as we like to think it'll never happen to us, accidents will happen. And when they do, your business (or yourself) can become liable for the damages.
Effective contractor management involves the checking and verification of all required documentation to prove the contractor is insured, qualified and competent. Now when it comes to insurance, contractors, at a minimum, should have two principal types of insurance:
Public Liability insurance - protects them against damages incurred on your site or project; the level of the cover will need to be balanced against the risk.
Workers Compensation insurance - covers their employees, if they get injured while working on your site or project. This is compulsory across Australia for all employees, and contractors should ensure both they and any subcontractors are covered.
A third insurance that should be considered is Professional Indemnity, which covers damages incurred by your business, due to the contractor providing inadequate or poor professional services.
Are your Contractors Qualified?
Contractors also need to have the appropriate licenses and qualifications; this ensures they are trained and familiar with relevant codes of practice and standards necessary for the services they provide. Without licensing, there is no guarantee that a contractor will play by the rules, meaning your project could be left high and dry.
Are your ‘Contractors’ Actually Contractors?
This issue has gained lots of media attention recently, with the likes of Uber and Foodora treating their drivers/riders as contractors, when there is a case for them to actually be considered employees under Australian law. Are you certain that all of your contractors are just that, contractors? It's unlawful for employers to represent a person as an independent contractor when they are, in fact, an employee. Breaches of the Fair Work Act can result in serious penalties, with a maximum fine of $63,000 for each transgression. The problem is, that it’s not always clear cut.
The courts will look at the whole relationship between parties to decide the status of a person's employment. Common contributing factors include:
Degree of control of how work is performed
Hours of work
Expectation of work
Level of risk
Tools and equipment
Method of payment
Leave entitlement
The above is not an exhaustive list by any means, but it shows there is no simple set of rules for employers to follow. If an individual is engaged as a contractor in your business, yet the Fair Work Act or ATO deem them to be an employee, then you leave yourself exposed.
The Benefits of Getting it Right
When it comes to contractors, I don’t want to come across as negative in my position. In fact, the opposite is true. If you can manage the risks of engaging contractors, they offer huge business benefits; it's no surprise that so many organisations are jumping on board. Contractors can provide:
Specialised talent - contractors are often experts in their field with niche knowledge and targeted experience. They are able to hit the ground running and deliver proven results.
Flexibility - hiring per project depending on business needs enables the workforce to be scaled up or down according to business needs.
Cost savings - while they earn more than employees, contractors are only engaged when required, and additional benefits such as annual leave aren't relevant.
Time savings - contractors require less consistent meetings and are more likely to take the initiative and ask if there is any support required.
Dedication - contractors are often selective about the projects they take on and are more passionate about the ones they choose.
With predictions that contingent workers will make up 20% of the workforce by 2020, if you don't use contractors yet, chances are you soon will.
Know the risks, avoid liability, and your contingent workforce will be far from risky.
For more information, contact us at +61 2 8883 1501, enquiries@conserve.com.au or subscribe to our newsletter for regular updates.