Running an internal exercise in your business to identify all the critical documents that are relevant to you, your business and your jobs now and into the future will be worth its weight in gold. This forms the foundation of whether your onboarding process is going to be successful or not.

The exact documents, their structure and how detailed they need to be will vary from industry to industry and even from job to job. It’s important to get professional advice if you are unsure of what your requirements are in any given scenario. That being said, here are some of the most common documents that need to be collected.

Subcontracting Documents

• Subcontractor business and contact details

The stock standard basic information to collect from a subcontractor include their business name, ABN, address and phone number. It’s also important to identify the primary contacts for the contractor for anyone who is going to be involved with your business. Also identifying the GST status of the subcontractor and doing a quick search on the ABN lookup to check it is valid and accurate can save some headaches later on. In some circumstances it can be worthwhile to store a copy of the contractors logo, business card and/or other advertising material for reference.

• Commercial contract

The contract spells out the terms and conditions of your arrangement with the subcontractor and is the most critical document of all. Failing to get a valid written contract signed and agreed to before work begins is opening your business to untold and unnecessary risks. It is also important to remember that a contract may also include several documents for larger projects and may be subject to change throughout the duration of a job when variations occur and are agreed by both parties.

• Scope of work

A scope of works is a thorough and detailed description of the work that needs to be completed. The size, scope and detail of your scope will vary depending on the complexity of the work involved. Be sure to get the subcontractor to sign-off on the scope to show they have taken in all the information and addressed any concerns ahead of time.

• Insurance certificates

Typical insurances include Public Liability, Workers Compensation, Professional Indemnity and/or Personal Accident & Sickness insurances. Insurance can extend to individual situations where specific insurances are required such as tools and equipment. When it comes to insurance, you need to get a copy of their ‘certificate of currency’ which details the insurance and triple check the contractor is covered for the level of insurance you require. Also important to note with insurance is that it can expire if the contractor misses payments, so you need to get updated copies regularly.

• Qualifications, licenses and tickets

Ensuring that your subcontractor has the correct skills and qualifications is important for your peace of mind that they’re capable but may also be a legal requirement. Allowing a subcontractor who is not adequately qualified or that has lapsed qualifications is a huge risk to your business and your clients. Licenses and qualifications expire and need to be monitored to be confident they meet their requirements.

• Right to work e.g. VISA, police checks, working with children.

Depending on your industry it may be important to check that the subcontractor has the right to work as a contractor in Australia. While their ABN is the most significant factor for a contractor to run a business in Australia it may also be necessary to get copies of their Visa conditions to stay within the law. Running background and police checks is a regular occurrence in industries where personal safety is paramount.

• Terms & conditions

When you sign a contract with a subcontractor spelling out the terms and conditions of the agreement, it may be worthwhile to check if the contractor has terms and conditions of their own. In some cases where a subcontractor provides their T&C’s attached to a quote or invoice, they can have a bearing on the engagement. Watch out for any inconsistencies and make sure they are dealt with in writing prior to work commencing.

• Safety documents e.g. SWMS, Site assessments & inductions

Safety documentation is another non-negotiable step to ensuring you are meeting your compliance requirements. Whether the subcontractor is working from home or working on a commercial construction site, there are important safety steps you need to address. Typical documentation includes Safe Work Method Statements (SWMS), location specific Site Assessments, General and site specific inductions as well as ongoing Tool Box Talks all contribute to a safe working environment. The checks and balances in a safe working environment are constant and need to be regularly addressed and updated.

• Payment documentation

The subcontractors invoice is the most obvious piece of payment documentation that you will need to collect. Once again, you need to scrutinise even an invoice to ensure that it meets minimum standards e.g. is the ABN supplied valid and current? You may also be required to or at least benefit from also collecting quotes, details of any negotiations and in NSW a subcontractor statement supplied with each invoice.

The main takeaway here is to thoroughly examine what documentation you need for any work you are hiring a subcontractor to complete. Understand that each piece of documentation is important for different reasons and any gaps in your paperwork may expose your business to unnecessary risks. If you would like more information on best practices for collecting all this documentation you can read on here.

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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.

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