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5 essential business risk guidelines for safely managing contractors

Published 08 April 2021

If your business uses contractors to carry out services for you or on your behalf, this guide for employing and managing them to avoid potential exposures is designed to help you create an effective contractor management framework to reduce your business risks, as defined by our insurance partner Vero.

To formulate a contractor management plan you should start by obtaining buy-in from internal stakeholders, including senior management. Establish a formal policy statement covering procedures for selection, induction, management and supervision of contractors. This essential information also needs to be communicated to all employees and contractors as standard practice. Responsibility for ensuring that contractor policy and procedures are followed, regularly audited and updated as necessary should be assigned to an appropriate staff member.



Before selecting and assigning work to a contractor, first ensure you have scoped the full extent of what they will be required to undertake, including necessary pre-work and each step of the process required for them to be able to carry out the project. Doing this helps to identify areas that call for specialised skills, as well as potential risks.

1. Choosing the right contractor for the job

To meet local, state and federal authorities’ regulatory requirements contractors under consideration for employment should have up-to date copies of all relevant licenses and/or registrations. Make copies of these documents to hold on file. Also check that the contractor has the required experience for the job by asking for references or contacting their current employer, if they are unable to supply referees.

Businesses offering contracting services may have a work safety statement or safety policy they can provide on request. If the contractor can’t demonstrate a safety policy or work method statement they may not be a suitable candidate for the job in hand.

If you are contracting a business to perform work that demands a team of employees, make it clear to the contractor that you are holding them responsible for ensuring all employees who will be working on the project are adequately qualified and will follow nominated procedures.

If the contractor is likely to use subcontractors they should also provide notification prior to subcontracting of the work, and specify the selection criteria and the qualifications prior to them prior to being engaged.

2. Ensuring protections in contractor agreements

In order for your policies and procedures to be binding ensure that relevant contracts include a clause requiring the contractor and their employees to follow company or site protocols. It’s helpful if you’re able to provide a manual covering these at induction.

The contract should include performance benchmarks including safety practices, quality of work, adherence to site procedures, policies and project specifications. Reviewing the contractor’s work when the contract is completed will assist also in developing a list of preferred contractors for the future.

Specify in the contract that all incidents and damage to property must be reported, and that it’s their responsibility to maintain the employer’s site or facility and equipment in good working order. This should be communicated during induction and reinforced through the contractor supervisor conducting spot checks on tools, materials and quality of work.

3. Supervision of contractors on site

Delegating a suitably experienced staff member to oversee the contractor, monitor work quality and check for compliance with site/company policies and procedures enables oversight of their performance. The staff member's duties could include regular meetings with the contractor, viewing their work progress and recording any instructions or issues.

Having a sign-on process which indicates the area where they will be working helps monitor contractors while on site. The supervising staff member should check this register regularly. Wearing of tags can also be useful for identifying contractors and subcontractors.

4. Communicating processes and safety protocols to all workers

Conducting company policies and procedures induction for all new employees, including contractors, before allowing access to a work site helps ensure all workers are aware of the requirements. An induction also provides the opportunity to make employees on site aware of unique building features, process hazards and/or protection systems in the areas where they are working and can include specific training where required.

Records should include the date of induction, who conducted it and a date for re-induction for long-term contracts. All inductees should sign off on a record of acknowledgement that they have received this training.

Content may cover

  • contractor site access and identification
  • supervision of contractors
  • hazards on site
  • working with dangerous goods and processes
  • reporting incidents and property damage
  • housekeeping
  • emergencies
  • fire protection
  • environmental protection
  • security
  • lockout/tag out

and specifically unique hazards such as

  • hot work
  • smoking
  • electrical isolation
  • disposal of waste and spills
  • working at heights
  • working in confined spaces
  • tools/equipment used on site
  • excavation and trenching.

5. insurance protections for contractors

It’s recommended that all contractors review their current insurances, taking into consideration holding public liability cover, workers’ compensation and professional indemnity insurance with up to date policies and certificates of currency on file and renewed as they expire.

Whether you are an employer, an agency that supplies contractors or a contractor who uses sub-contractors it’s important to consider the right insurance cover, and that’s where Gallagher expertise can help you ensure you have the right protections for your situation.


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Further reading

Corporate business insurance

Civil Contractors Federation (CCF)

The Gallagher guide to casual employment conditions

Recruiters and agencies, be sure to cover your legal liability exposures

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