IT Contracting Role - PAYG - Insurance Requirements?

Hello All,

Update: good result. The contracting company agreed to absorb the rate into my day rate.

Previously I have been working in IT in Prem full time roles as employee. I have been offered a 6 month role through a Recruitment Company they had advertised. There is no requirement for ABN or Pty Ltd they are paying PAYG and handling super. Believe it's called "Labour Hire"

They have offered a "package" which includes the ability to get their benefits (random membership discounts), Salary Packaging, weekly pay and the main thing is Professional Indemnity Insurance and Liability Insurance.

I will be contracted to 1 employer, 9-5 doing what ever work they direct me at the time. They supply all equipment. I will be paid by Recruitment Company. I have no paid leave entitlements + 2 weeks notice period.

I was not sure if I was required to provide my own insurance or I should be automatically covered. I can't get a 100% answer out of the company and I feel they might be selling it as a "package" and providing insurance that I don't need as it should already be provided. It is 1% of my gross wage and if I have to have it, I will get it (Or get it from another external company).

I just wanted to see if anyone else had any similar experience, I understand it would be clear cut if I had my own Pty Ltd but as it's PAYG and they are ticking all the other boxes as a employee not a contractor.

Not sure where to turn for impartial advice in this situation.

Thanks All!

EDIT: it's 1.5%

Comments

  •  

    Just curious, working in IT, what situation when you need "Professional Indemnity Insurance and Liability Insurance."? Unless part of your work involves lifting heavy items, but if you are 90% of the time sitting in front of laptop, what are the worst possible risk>

    • +6 votes

      what situation when you need "Professional Indemnity Insurance and Liability Insurance."

      but if you are 90% of the time sitting in front of laptop, what are the worst possible risk

      Its not for you, its for them.

      So when you're sitting at your laptop and press the wrong key and break something really badly that costs 'millions' to fix, this insurances covers you when they sue you for your screw up.

  • -2 votes

    IBM and the cencus ;)

  • +1 vote

    I just wanted to see if anyone else had any similar experience, I understand it would be clear cut if I had my own Pty Ltd but as it's PAYG and they are ticking all the other boxes as a employee not a contractor.

    I've worked at a agent that charged 1% for this insurance, I got some quotes and it was cheaper to buy my own for the year.

    If you're a PTY, then you really need to be careful as sometimes you need to provide proof you supply/cover your own work cover and insurances like Indemnity Insurance and Liability Insurance anyhow.

    If you don't want the hassle, just PAYG it and get some quotes. If 1% of your wage is less than the price of the Indemnity Insurance and Liability Insurance policy, go that way. If not, get a policy.

    •  

      Yep, I really don't want the hassle but also at the same time… Also don't want to be paying through the nose (vs paying for convenience). I'll see what I can do. Thanks for your reply.

  •  

    Ask for what combinations there are in regard to package or non package when PAYG.

    My current organisation offers no packages, and charges low fees. I can't salary sacrifice anything.
    My last organisation offers packages, but I negotiated the top package for no fee (over base 'cut'). I had access to salary sacrifice (good for a new laptop/phone).

    Insurance should be provided for you at equal amounts, regardless of package when working as PAYG. They will have one massive policy that covers everyone who works through them.

  •  

    I can't see why you'd need professional insurance working in IT. I'm in the same role as you, permanent IT contractor with 1 company via a recruiter who pays my PAYG etc. I don't need professional indemnity insurance.

    Suggest you go back to them and tell them you don't want their package. You just want the bog standard PAYG fortnightly pay and nothing else. I assume the other package "benefits" are fairly minor and you can do without them.

  • +3 votes

    IT Contractor here. Have done both contracting through recruiting company and my own PTY LTD.

    The insurance is usually required by the client (the company you'll be working at). When contracting and paid through the recruiting company, mine was 2% for fees/insurance.

    Everything you said in your post sounds common practice.

    Congrats on the job. Enjoy the pay bump and welcome to contracting.

  • +1 vote

    I agree with the above. I've been contracting in IT for several years - professional indemnity + public liability insurance is a requirement. I'm covered through a separate payroll company to my recruitment firm as it allows me to take different contracts, but it means that on paper I've been working for the same company throughout.

    Sounds like the package your pimp is offering you covers you for what you need from an insurance perspective.

  •  

    Thanks all for your comments. PAYG and pay processing is included. It's only it I want the "package" which includes insurance that is the 1%.

    From what I have seen, depending on the level of insurance I get externally it would be probably 50% of the cost of the "package".

    They are not forcing me to buy insurance or package, though I don't really want to be liable if something random did happen and I don't have insurance. Just more didn't want to double up if they should already be providing me with insurance legally.

    I will ask them to absorb it as it was a last minute thing after all negotiations.

    EDIT: it's 1.5%

    •  

      liable if something random did happen and I don't have insurance

      Like what?

      •  

        I think that is the whole point of Insurance, it is against the unknown. I believe it would be related to the fact if I implemented something incorrectly and it causes outages/failures which resulted in downtime/$ I could be liable if they wanted to go down that path. I don't believe this would be the case but I would rather not think about it.

        •  

          I think you're being paranoid.

          •  

            @Skramit: Doesn't mean they are not out for you… I'd rather not have this type of situation https://www.ozbargain.com.au/node/465450 if I can avoid it :D

            •  

              @Midz: "Professional indemnity insurance is particularly relevant to those in professions which provide advice for a living. A professional can be anyone who "provides advice or services of a skilful character according to an established discipline".

              Are you going to be in a role where your primary role is giving advice to customers as a self-employed person? If not, just give it a miss. It's unnecessary.

              The business you're working for will already have this insurance (if advising clients) etc. You don't need to double up.

  •  

    I'm pretty sure I know exactly the recruitment company you are referring to. Whether or not you "need" the insurances is debatable, but you will certainly be able to source the insurances MUCH cheaper yourself.

    The 1.5% fee is a money making exercise for the company involved. In my opinion, they are skirting disclosure (or similar) laws on this insurance by offering it as a "package" with the other "benefits" you refer to. Therefore, the cost of the insurance is hidden by the "cost" of the other benefits that are being provided to you.

    •  

      Ha… Yeah that was what I was actually thinking, they useless things up in a package (Useless to me at least) and charge you for it. I will see how they go about absorbing the extra fee's if not, I will take out my own external policy. If it's a cash cow, it might have wiggle room.

      • They also provide weekly pay vs Monthly if you have "Contractor Benefits" package.
      • +2 votes

        They also provide weekly pay vs Monthly if you have "Contractor Benefits" package.

        Yep, more evidence that I know exactly who you are talking about. By all means, see if they'll absorb it, but otherwise just get the insurance yourself.

        Without getting into specific earning rates, etc., sourcing this insurance myself effectively came at a cost to me of ~0.2% vs. the 1.5% they want to charge. The only thing of even passing value to me was the weekly payment. But I'm not giving up 1.3% of my earnings just to be paid a little quicker.

        In practical terms, your week 1 pay is just paid three weeks later, week 2 is paid two weeks later, week 3 is one week later and week 4 you're getting paid at the same time anyway.

        So for ease of calculations, let's say you're making $2k a week. If you were to put the first week's pay against a mortgage at 4% interest for three weeks, that's a benefit of $4.62 ($2,000 * 4% / 52 * 3). The second week's pay is worth $3.08 and the third week's pay is $1.54.

        A total of $9.24 in benefit.

        And to earn this $9.24 you ask? You have to give up $104 ($2000 * 4 * 1.3%)!

        I've rounded some of the calculations out to make this easy, but the difference is massive. It is an egregious example of the "lazy tax". Don't get caught out!

  •  

    I guess the follow on question would be any Insurance company recommendations and/or What $ levels for insurance. I see there are levels up to $20m for each.

    I have seen other posts were Express Insurance and Bizcover are recommended.

    •  

      I've used Bizcover (for IT PI+PL) and found them to be easy and competitive so I'd recommend them, I have no experience with Express Insurance.

  •  

    I am a PAYG contractor (IT) I get paid the rate I was quoted, which includes super paid (out of my quoted rate) and fortnightly pay. There is no requirement for insurance and I do not pay for it. The company quoted a ridiculous 0.5% fee for me to salary sacrifice to super, but then I discovered you can just make your own contribution and claim a deduction for it later to reduce your tax so I told them don't bother, and I manage it myself. Why do you need insurance?? Sounds like a money grab.

  • +1 vote

    Thanks all. Quick update, good result. The contracting company agreed to absorb the rate into my day rate.

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