June 2008
Independent contractors can often bring great benefits to an organisation, including meeting the needs of a short-term project or providing unique skills and abilities. Many companies see the advantages but very few understand how getting the engagement process wrong can leave them legally exposed.

Developing professional, clear and robust written contracts that properly represent the intentions of the parties is the first step. Ensuring the documents are signed and stored securely is the second. The failure to secure all relevant documentation from a contractor at the start of the relationship (including insurances and accreditation documentation) is a common example of where a company may be left liable when the contracting relationship turns sour. An all too common example is the one below.

 

A large IT company has engaged an independent IT contractor to perform IT security and maintenance work at its largest client. This client suffered an IT breakdown as a direct result of the independent contractor's negligence, causing financial loss in excess of $100,000. The client makes a claim against the company to recover its losses.

The company pursues an insurance claim against the independent contractor only to find that:
  • It failed to execute a renewal of its original contract, which expired last month; and,
  • The contractor's professional indemnity insurance had expired 3 months prior to the incident.
The company is now at risk of failing to recover the losses from the independent contractor and incurring damages of approximately $100,000 due to an administrative oversight.
  • Arrangements with independent contractors should be clearly stated in writing, including any extensions on the original term of the contract. Written agreements are an also an important way to protect the bona fides of the independent contractor relationship.

  • Prior to engaging an independent contractor, it is important for a company to ensure that the independent contractor holds all licenses and insurances to lawfully perform the work it is to undertake.



  • Independent contractors are often responsible for paying for their own taxation and insurances. It is therefore vital for companies to ensure that contractors have arranged and retained adequate and current workers compensation insurance, public liability insurance and any other suitable insurance required under legislation. The contractor should make a copy of these policies available to the company upon request.

  • The company must put in place systems to ensure contracts, insurances and critical documents are valid and up-to-date at all times.

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  • PeopleInsite provides a platform to create simple independent contractor agreements using a Q & A format to ensure that companies get the agreement they need.

  • Unique contractor storage facilities ensure companies can manage and maintain accurate records for all contractors in a single secure online environment.


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  • PeopleInsite's alert system ensures that companies that engage independent contractors are kept informed through regular email reminders about the expiry of important documentation.

  • Maintaining sophisticated contractor records management through PeopleInsite will ensure your organisation can minimise the exposure to risk in the event of an incident.

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    See what other organisations have to say about PeopleInsite.
    For more information on PeopleInsite, contact on (02) 9964 9716 or email info@peopleinsite.com.au
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