A contractor or sub-contractor may be defined as a ‘worker’ if they are engaged to do work by another person for the purpose of the other person’s trade or business, and they are paid in substance for their personal manual labour or services.

Examples of people who work under a contract for service and are likely to be considered a worker include:

• Contractors or sub-contractors who perform the actual activities of the employer’s trade or business (e.g. a bricklayer or plasterer contracted by a builder).
• Contractors or sub-contractors who perform activities for the efficient conduct of an employer’s trade or business (e.g. a fencing contractor contracted by a farmer).

Working as a ‘team’

Many sub-contractors work as teams and believe no cover is required. If one of the team members has the right to hire, fire and supervise the others, then there may be an employer/worker relationship. If that were the case, the team leader would be required to take out a workers’ compensation policy to cover the other members of the team.

Covering all workers down the contractual chain

Under section 175 of the Act, if a person (the ‘principal’) contracts with another person (the ‘contractor’) to perform work which is for the purpose of the principal’s normal trade or business, then both the principal and the contractor are liable to cover any workers the contractor may employ. Both parties are jointly, and severally liable to cover the contractor’s workers. In other words, each must have a workers’ compensation policy.

Furthermore, if the contractor in turn sub-contracts the work to a sub-contractor, then all parties - including the principal, the contractor and the sub-contractor - are liable to cover any workers the sub-contractor may employ. If one of the sub-contractor’s workers is injured at work, a compensation claim could be made on the principal, the contractor or the sub-contractor. Therefore, principals should ensure that contractors have current workers’ compensation insurance policies, and all workers should check that they are covered.

More information

For more information, read the Contractors and Workers’ Compensation (PDF - 1.1MB) information sheet. If you have further queries, contact Advisory Services.