Contractors & subcontractors

A contractor or sub-contractor may be defined as a ‘worker’ if they are engaged to do work by another person for the purpose of the other person’s trade or business and they are paid for their personal manual labour or services.

Examples of people who work under a contract for service and are likely to be considered a worker include:

• contractors or sub-contractors who perform the actual activities of the employer’s normal trade or business (e.g. a bricklayer or plasterer contracted by a builder).
• contractors or sub-contractors who perform activities for the efficient conduct of an employer’s trade or business (e.g. a fencing contractor engaged by a farmer).

Under section 127 of the Return to Work Act 1986 (the Act), if a person (the ‘principal’) contracts with another person (the ‘contractor’) to perform work which is for the purpose of the principal’s normal trade or business, then:

• the contractor is legally responsible for compensation to any workers employed by the contractor to do the work or provide the service under the Act;
• in some circumstances, the principal may also be legally responsible for compensation to any workers employed by the contractor to do the work or provide the service to the principal under the Act;
• in some circumstances, both parties have a joint legal responsibility for compensation payable to the contractor’s employed workers;

For these reasons, it is essential that each party have in place a valid, applicable and current workers’ compensation insurance policy in the Northern Territory.

Furthermore, if the contractor in turn sub-contracts the work to a sub-contractor, then all parties – including the principal, the contractor and the sub-contractor – may be liable for compensation to any workers employed by the sub-contractor to do the work or provide the service in the principal’s normal trade and business.

Principals should ensure that all contractors have a current workers’ compensation insurance policy, and all workers should check that they are covered under the Act.

Contractors who engage sub-contractors should ensure that all sub-contractors have a current workers’ compensation insurance policy and all workers should check that they are covered under the Act.

The easiest way to confirm that contractors or sub-contractors have a current workers compensation insurance policy as required by the Act, is for the principal (and /or contractor) to ask to see a copy of the current policy.  You should not rely on being told that a policy exists, nor of the existence of a policy being written into a contractual agreement.

Confirmation of contractors’ or sub-contractors current insurance policy will ensure that, as much as possible, all workers are covered while performing work and providing services to the principal (and / or contractor) as part of their employment with the contractor or sub-contractor.

Video Resources

The below videos have been developed to give businesses helpful information about workers compensation:

• Workers compensation insurance – Guide for employers

• Workers compensation – Guide for insurance brokers