Hiring subcontractors comes with a wide range of legal obligations and responsibilities that have to be met to maintain compliance. Getting your compliance right is essential to building your business on solid foundations. However, the nature of subcontracting laws makes them notoriously difficult to understand and expensive to implement. Due to the excessive time, money and administration required to meet certain obligations, many businesses are left in the dark and expose their businesses to risk and uncertainty. With so much riding on the compliance of your subcontractors and little clarity over how to do it, learning the essentials is critical.

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.