Home Building Tips For Builders In NSW
- Managing Your Sub-Contractors -

Whether you engage one sub-contractor throughout the whole year, or fifty sub-contractors at any one time, there are a number of different factors that you should monitor and manage to protect your business.

By failing to monitor and manage just one aspect of a sub-contractor you have engaged, your business could be left heavily exposed.

Below is a summary of the main factors you should watch out for.

Employee or Contractor?
You should always ensure that the person you have engaged is a sub-contractor running their own business, and not an employee who is simply part of your business. 

Risk:  If the person is deemed an ‘employee’, then issues relating to employment entitlements, income tax, workers compensation premiums and general liability will arise.

Quick Tip:  Once a ‘sub-contractor’ starts to earn more than 30-40% of their income from the same builder, they will start to enter the ‘danger zone’ of being deemed that builder’s employee.

Licensing
If you are a licensed builder who performs residential building work, make sure any sub-contractors you engage hold the appropriate licence from the NSW Office of Fair Trading for the building work they perform. 

Risk:  If you engage a sub-contractor who is unlicensed, then both you and the sub-contractor could face heavy penalties.

Insurances
You should make sure that your sub-contractor holds adequate insurances, including workers compensation (if it applies), personal accident and sickness, public liability, and sometimes construction works insurance.

Risk:  If something goes wrong, and the sub-contractor is uninsured, then the liability may fall back onto your business

Liability
A sub-contractor will usually be liable if they perform defective building works.  On the other hand, if that person is considered your ‘employee’, then you will be liable for their defective building works.

Occupational Health and Safety
Generally speaking, where you are performing any type of construction work that exceeds $250,000 in value, each sub-contractor you engage must provide you with a Safe Work Method Statement.  For more information on your OHS obligations, see our Online CPD Course Basic OHS for Builders.

Home Warranty Insurance
If you engage a sub-contractor to perform residential building work, then generally that work will be covered under your home warranty insurance policy.  However, if a sub-contractor is engaged directly by a home owner or an owner-builder to perform residential building work that is more than $12,000, then that sub-contractor will need to take out their own home warranty insurance policy.

Trade Contractor Statements
These statements are recognised by law, and can protect a builder from being liable under workers compensation laws, payroll tax laws, and industrial laws, when having engaged a sub-contractor.  For more information on Trade Contractor Statements (including a free sample Statement for you to use), see our Online CPD Course Dealing with Sub-Contractors.