The key to having a clear overview of your contractors compliance, is to use metrics to test each of your subcontractors against, on an ongoing basis. The metric is simply what you are trying to measure, for example, is the contractor insured or not? By using a metric with a yes or no, we can now measure many contractors at the same time against a pre-set list of questions or ‘metrics’. This is what we call a metric-driven approach to compliance.

A metric driven approach is about measuring each individual subcontractor against a set of questions to better understand their compliance. Only then can you say with confidence, yes all my contractors meet their compliance requirements.

What is a Metric Driven Approach?

In a metric driven approach, we are identifying all the different aspects that go into a subcontracting relationship and breaking them down into individual steps. By doing so, we remove the confusion that often comes from trying to answer a question like “are your contractors compliant?”. It is unlikely you are going to be able to answer a question like that off the cuff, but a question like “does your contractor have a public liability insurance certificate?” is far easier to answer.

The result of addressing each individual question is that you will get a great high level overview of where your compliance is tracking with each individual subcontractor. Taking this approach does three very powerful things:

1. Forces you to collect the physical documentation you need to show proof of compliance.
2. Identifies gaps in your documentation that you may not be aware of.
3. Highlights your greatest weaknesses for achieving compliance.

Taking a metric driven approach will save you enormous amounts of time and money by focusing on what you can improve internally before engaging specialist professionals to assess your business.

The best way to think of a metric driven approach is as a heat gauge, with each metric providing a notch on your gauge that will give you a single point of reference to review your subcontractor relationships.

22 Compliance Metrics

Subcontracting comes in all shapes and sizes which makes it difficult to address compliance when there are so many moving pieces. To overcome this challenge we have developed a set of questions or metrics that can be applied to any contracting scenario.

Our metrics are based on legal principles that have been used in previous decisions by the courts to determine the nature of a contracting relationship (it’s called the ‘common law’). Almost all pieces of legislation contain one or more description based on these common law principles and they form the basis for which many laws have been built from.

After reading countless court decisions, we have distilled down a set of 22 metrics that can be used to measure the compliance of a contracting relationship. These metrics are not exhaustive, as the list of tests used by the courts over time would be far too overwhelming. However, this set of 22 metrics is the most comprehensive set of tests we have come across in the Australian landscape.

Some of these metrics are very simple, such as what is the structure of the business you are engaging, others such as safety, are more complex. In each metric, you are trying to gauge what you have documented, what the reality of the engagement is and where responsibility lies if something goes wrong.

Evidence is King

Because we use such a comprehensive set of metrics, we get to paint a vivid picture of the relationship you have with the worker you are engaging. A key point of using these metrics as a measurement tool, is that you must be able to prove your answer to each metric with physical evidence. I can’t tell you how many times I have asked a business owner if the subcontractor has their own insurance, the answer is normally always yes. When I ask can I see a copy of their certificate of currency that details their insurance, there are a lot less people that I would fit into the yes category.

Evidence comes in many forms and may be simpler than you think to collect. The primary goal here is to be able to support your answers with physical evidence of some description. Not all evidence is created equal and the act of having to produce documentation will allow you to review the quality of the evidence that you can produce for any given aspect of the relationship.

Applying the Metrics to Legislation

In Australia, there is a long list of legislation that affects subcontracting such as tax law, superannuation law, work, health and safety laws, workers compensation and much more. Each of these laws can be applied to contracting arrangement and each law needs to be followed with strict compliance.

Metric number 22 is ‘Statutory Entitlements’, that metric is specifically drawing your attention to the fact that these metrics need to be applied to each individual piece of legislation. The beautiful part of measuring compliance using these metrics is that if you have done the work to put them together, they can be applied largely as they are to each piece of legislation. Similarly, if you have all your documentation in place covering these 22 metrics, you will save a lot of time and money taking your situation to a legal professional to provide advice on whether you are meeting your obligations.

The post How to Reduce Contractor Compliance Risk appeared first on SubbieHub.

Why do I need to check up on my subbies?

Failing your responsibilities as a hirer of subcontractors often leads to crippling fines, penalties, and back-payments. With such a wide-spread range of laws affecting the engagement of a subcontractor, there is little room for error.

Each regulator and piece of legislation has a range of consequences that can be applied to non-compliance depending on its severity.

Because of the challenge of compliance and the overwhelming amount of work it would take to constantly review each piece of legislation and apply them to each individual subcontractor, compliance is rarely measured in small business.

To protect your business from being built on quick-sand, you need to ensure that you are meeting your minimum responsibilities for compliance.

What laws do I need to comply with?

Subcontracting is built on the foundations of a commercial contract, where two parties come together and make an agreement. This allows subcontracting to be one of the most flexible, productive and scalable forms of engagement, but it also means the laws that govern contracting are scattered.

Here are some of the most common laws you will come across in a subcontracting engagement:

• Workers Compensation
• Tax law: income tax, payroll tax and pay legislation
• Work, health & safety
• Commercial contract law
• Superannuation
• Unfair contracts
• Employee vs independent contractor
• Industry specific legislation
• Vicarious liability
• Payment specific legislation
• License specific legislation

Each of these laws comes with a substantial body of specific legislation and often has volume after volume of case law history attached to it. Complicated laws like each of these require expert advice from professional legal practitioners who in many cases will specialise in one of these areas of law. To get a thorough and comprehensive review of your subcontracting engagements, it may be necessary to get advice from several specialists.

How do I navigate such a labyrinth of laws?

One of the greatest challenges for small businesses trying to meet all these compliance requirements is that each law has its own little differences. In some cases two different laws can look at the same scenario and produce a different outcome. For example extended definitions under Workers Compensation might require you to include a contractor on your policy while tax law says the contractor is treated as an independent entity.

The biggest trick to navigating these laws is to ensure you have collected and verified all the documentation between you and your subcontractor. Typically this is going to be the first step when you see a legal professional anyway. Often times, the simple act of collecting and registering the existing documentation in the business will highlight gaps in missing documents or procedures that are not being followed.

We have developed a unique set of compliance metrics to give small businesses a tool they can use to get a high-level gauge over the general compliance of their subcontractors at any given point in time. You can read more about it here ‘how using metrics can help you achieve contractor compliance’.

Managing your risk

The primary goal with any compliance objective is to manage the risks to you, your business and the people you’re working with. The reality is that compliance is not a one-off fix and requires your constant attention. Taking the time to understand your responsibilities and implementing simple processes to ensure you are meeting them will produce substantial benefits to you, your team and your business in the long run.

The post What Most People Miss With Contractor Compliance appeared first on SubbieHub.

1. Engaging a contractor without a contract

The commercial nature of contracting relationships means that a contract detailing the engagement is imperative. The idea of a hand-shake agreement between friends regularly comes un-stuck and leaves a big mess in its wake.
A simple contract that spells out the terms and conditions of the arrangement and expectations of both parties will often save you a lot of pain in the long run. Having it written down and agreed minimises disputes and creates a clear platform for everyone to get on with the job.

2. Inadequate document management

Contracting requires more documentation than most other forms of engagement and needs to be managed efficiently and appropriately. Because contracting covers a wide range of legal responsibilities and wide-ranging industries, the documents you need to collect and the frequency you need to collect them will vary.
Insurance misinterpretations are common, where a business will hire a contractor and ask for their certificate of currency, which is valid at that time. Later down the track if the business hires that same contractor and fails to get an updated certificate, the insurance may have lapsed or expired without them knowing.
Other documents like qualifications, licenses, green/white cards, subcontractor statements (NSW) etc. should all be collected and monitored to ensure compliance standards are maintained ongoing.

3. Safety oversights

Safety on a worksite is one of those non-negotiables and is highly regulated regardless of the type of worker you are engaging. Just by hiring a contractor does not pass off all your responsibilities to ensure the worksite is safe.
Essential to meeting your safety obligations will be the ability for you to prove you have taken steps in conjunction with the contractor/s to manage the safety of the site at the beginning, during and end of the job.

4. No onboarding or induction process

Each and every time you engage with a contractor it is critical to go through a consistent and transparent onboarding process to ensure all documentation is accurate and up to date. Failing to take this step or skipping important documents leaves a hole in your compliance management. While it may not be apparent straight away, all too often missed documents will come back to bite you down the line.
Induction processes are often linked to safety protocols, which are important, although inductions can be used to help bring a contractor up to speed on all aspects of a job. Incorporating into induction material your business philosophy, expectations, process and timelines can help them to see the big picture and work in with the rest of the team.

5. Incorrect worker classifications

Workers can be classified in a myriad of different ways for the purposes of different laws and regulations. Understanding where a worker sits within the legal system is no easy feat but is essential to staying on the right side of the law.
On top of the common law view of a contractor vs employee, laws that regulate superannuation, workers compensation, payroll tax and more have extended definitions that can deem certain contractors to be employees.
Take the time to gain a thorough understanding of your obligations under the different rules and get independent legal advice on your engagements or risk substantial consequences.

6. Poor contractor management policies and procedures

Many small businesses overlook the importance of having a documented process for managing the day to day engagement of a contractor. Having a written policy and procedure helps to ensure that all important documentation is identified, and a set structure is followed to maintain those standards.
Just as important as having a written policy is making sure that it’s followed by all members of your team and that it is enforced consistently. I sometimes come across a fear from businesses that they don’t want to put too much pressure on a contractor to follow protocol or the will move on. The reality is that if a contractor is not conforming to simple compliance requirements, it’s often a good thing if they move on before things go wrong.

7. Relying on individuals rather than a system to track compliance

We are all human and humans make mistakes. A system on the other hand is designed in specific ways to remove the opportunity for mistakes to happen. A simple and structured contractor compliance management system will identify and highlight important or missing information before it becomes a problem. Similarly, as individuals we tend to default to management practices we are comfortable with, meaning that each and every person has their own unique way of doing things. If compliance isn’t managed in a systematic way, it leaves too much up to personal interpretation.

The post Top 7 Contractor Management Mistakes appeared first on SubbieHub.