There are some insurance and contractual issues that you should think about if you’re considering using contractors or subcontractors.
As well as employment rights, tax and health and safety, you should consider liability insurance when you engage contractors or subcontractors:
- If you have employees, you need employer's liability insurance. However, non-employees - such as contractors - aren't covered. Therefore, you will also need to have public liability insurance (PLI).
- Your PLI policy should cover contractors/subcontractors working for you away from your premises unless the contractors/subcontractors have their own PLI with the same level of cover.
- If contractors/subcontractors are working on your behalf, check they have appropriate insurance.
- If a contractor works at your business premises, eg a builder, they should have their own insurance to protect you and your property, while your PLI covers them.
To be certain, consult an insurance adviser and notify your insurer that you are using contractors/subcontractors.
Many businesses aim to incorporate certain clauses into their contract with the contractor/subcontractor.
- protection of your intellectual property rights - eg material and equipment designs - if these will be accessed or used by contractors/subcontractors
- non-disclosure agreements - these might be needed if you have to tell contractors/subcontractors about - or they help you develop - confidential aspects of your business
- a project schedule - including performance targets and deadlines
- a payment schedule - this might include payments on account and the criteria to trigger such payments, eg completion of a piece/stage of work
- penalties for poor workmanship or late delivery
- minimum quality standards
- minimum health and safety standards - see health and safety requirements when using contractors and subcontractors
If in doubt, consult a legal adviser before you agree a contract for services with a contractor/subcontractor. Choose and work with a solicitor.
If you aren't involved in choosing a subcontractor, tell the contractor you expect them to address these matters in contracts with their subcontracted workers.