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The phrase ‘Contract Of Service‘ is generally used to refer to the Contract between employer and employee. It contrasts with the term ‘Contract For Services‘, which is generally used to characterise a relationship with an independent contractor.
A subcontractor works independently and provides services as specified in a Contract or Agreement For Service and can accept or refuse any additional work. Independent contractors run their own business. They usually negotiate their own fees and working arrangements and can work for more than one client at a time. Independent contractors are often called contractors or subcontractors (subbies). Subcontractors use their own tools and/or equipment which are required to complete the work.
An employee works within the business and is considered part of the business and is employed under a Contract Of Service.
The following are a list of the most common questions and statements that we hear from sub-contractors.
I’m covered by my contractors insurance!
You might be, but have you ever bothered to check; or do you simply take their word for it.
I am covered by my contractors insurance!
You have checked and you are named on their policy, but you will only be covered for the work that you do for and on their behalf. You will not be covered for any independent work that you do. Furthermore, because Professional Indemnity is a claims made policy, you need to be named on the policy at the time when a claim is made upon you; and that might not be for many years into the future. So what happens if your contractor removes you from their policy. You will cease to have any cover, even if you were covered at the time that the loss occurred.
Insurance is a load of rubbish and a waste of money!
If you are able to go through your entire life without ever having a claim or needing to use an insurance policy, then your statement might be partially correct. But, the whole point of insurance is to transfer risk, so as to give you peace of mind. It is the unknown and unforeseen that you are insuring against. If you ever find yourself in a situation where you are being sued, you will need the best part of $10,000 just to cover your legal costs in defending your good name. Insurance covers these costs and if you are found liable to pay a claim, then they pay the claimant’s claim and costs as well. With premiums starting from only $599 per year, there really is no logical reason not to insure yourself.
Is my insurance premium tax deductible?
Yes, all insurance premiums are fully tax deductible and you can claim the GST component on your quarterly BAS.
My contractor has asked me for a certificate of insurance, why?
Your contractor is making sure that you hold valid and current insurance. A valid certificate of insurance is the proof they require. Furthermore, you contractor may hold contracts with Financial Institutions, who make it a condition that all sub-contractors that are engaged, must be appropriately insured.
You can engage the services of any sub-contractor, whether they hold insurance or not. Your policy will always cover you for any vicarious liability that may arise from the use of a sub-contractor or their actions. However, the policy will not cover the liability of the sub-contractor, but you will be covered to the extent of their vicarious liability, e.g. any negligent act they commit whilst acting on your behalf, for which you are held liable. Before engaging any sub-contractor you must always first check that they are appropriately qualified and licensed, hold their own valid Professional Indemnity, Public & Products Liability and Workers Compensation insurances.
Uninsured Sub-Contractor(s) can be named on your policy for under your Professional Indemnity and Public and Products Liability insurances. They will only be covered whilst undertaking services provided for and on your behalf. Cover under the Professional Indemnity policy will only last for as long as they remain named on the policy, once removed, all cover will cease from that point. Sub-contractors will not be covered for claims made after that date, even if they were on cover at the time a claim occurred. Additional premiums may apply depending upon the number. Sub-Contractor(s) whom have their own insurance do not need to be named on your policy.
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