How To Make Sure You’re Protected When Hiring a Subcontractor
Subcontractors are the people and businesses that provide services to other companies on a temporary basis. When hiring subcontractors it’s important that you understand which risks are associated with using them in order to ensure your business is protected from potential losses. The following guide will cover the risks associated with hiring a subcontractor, and how you can make sure your business is fully protected with subcontractor insurance:
What is a subcontractor?
A subcontractor is an individual or business that is hired by the main contractor to perform a specific task.
Subcontractors are often hired to perform a specific skill that the main contractor does not possess. For example, if you’re hiring someone to sand your hardwood floors, you might hire a professional floor sander instead of trying to do it yourself. Even though this person isn’t technically employed by you in any way, they are still considered your subcontractor because they were brought on board with the intent of completing work for which there was no other means available (namely, a professional floor sander).
What are the different types of sub-contractor?
As a small-business owner, you may not think about sub-contractors often. But if you hire one or more subcontractors to help with a project, it could impact your liability as an employer.
An important thing to know is that there are two types of subcontractors: bona fide and labour only.
Bona fide subcontractors are typically in the same industry as their principal contractor (the company they work for). They have the skill set required by the project but need assistance from someone else because they don’t have enough employees on staff themselves.
Labour only sub-contractors are hired solely because they’ll perform labour on projects—they don’t own any tools, equipment or training specific to their trade.
Risks associated when hiring subcontractors
One of the main risks associated with hiring subcontractors can be a lack of experience or qualification. This can lead to a number of problems, including:
- Poor quality of work or unfinished work
- Delays or going beyond the deadline
- Defaulting on work
- Insufficient equipment or machinery being used
- Damage or injury to third parties
- Liability for damage or injury to a third party. If you hire a subcontractor and they cause damage or injury to someone else, you may be responsible for their costs as well as any fines imposed on you by the authorities (such as WorkSafe).
- Loss of business reputation
The quality of your work can have a significant impact on your business. If the subcontractor’s work is poor, you may lose customers, or they may refuse to pay for the job. It can also lead to legal action against you if they suffer injury due to faulty equipment or machinery supplied by the subcontracted company.
How to protect yourself from the risks
You can protect yourself from the risks of a subcontractor by requesting for sub-contractors insurance or adding them to your policy. This is an easy way to make sure that you are covered should something go wrong, and it also helps you avoid any legal issues down the line. If you want to make sure that everything goes smoothly, here are some things you should do:
- Ensure you have a clear sub-contractor contract agreement.
- Make sure that your contractor has the right experience and expertise for the job.
- Make sure they have a good reputation in their industry, both online and offline.
- Find out what sort of track record they have when it comes to completing projects on time and within budget – this will give you an idea of whether they’re likely to be able to complete yours as well.
- Look into what kind of safety protocols they use during construction – this will help ensure that everyone stays safe while working on site.
- Ask for references from previous clients – this will give you a better idea of what their work is like and whether they are likely to be able to complete yours.
Get the right cover
The best way to protect yourself when hiring a subcontractor is by making sure you have the right insurance. There are many risks involved when working with such third parties, and without proper insurance coverage those risks could cost you thousands of dollars.
Don’t let this happen! By doing your research and getting the right protection before signing any contracts with new companies, you will be able to ensure that both sides of every deal get what they deserve no matter what happens next. Contact us for more information.