On a construction site, a lapsed Letter of Good Standing is not an admin problem. It is a principal-contractor liabilityrisk — which is why principal contractors routinely refuse site access until the letter is valid and on file. This is not the principal contractor being difficult. It is the Construction Regulations doing exactly what they were written to do.
This guide explains what the Construction Regulations under the Occupational Health and Safety Act actually require, why the stakes are higher in construction than any other industry, and what contractors and subcontractors need to keep on file to stay on site.
If you are new to COIDA entirely, read the COIDA Employer Guide first — this article assumes you are already registered with the Compensation Fund.
The two regulations that change the game in construction
Two legal requirements make construction different from every other industry when it comes to COIDA. Together they are the reason principal contractors enforce Letter of Good Standing checks at the gate.
Regulation 7 of the Construction Regulations, 2014
Regulation 7 places an affirmative duty on the principal contractor to verify the health, safety, and compensation compliance of every contractor it engages on the site, before work begins. This includes confirming that each contractor is registered with the Compensation Fund and holds a valid Letter of Good Standing.
The duty is not delegable. The principal contractor cannot shift responsibility to the contractor by saying “they told us they were compliant.” The regulation requires verification, which in practice means collecting a copy of the letter and keeping it on the site file.
Section 89 of the Compensation Act — mandator liability
Section 89 of the Compensation for Occupational Injuries and Diseases Act creates what the industry calls mandator liability. If a contractor you engaged is not registered with the Compensation Fund, and one of that contractor's employees is injured on the work you engaged them for, the Fund can hold youliable for the compensation payable to the injured worker — because your mandated contractor had no cover.
A Letter of Good Standing is the piece of evidence that proves you verified the contractor was covered. Without it on file, Section 89 exposure is a real financial risk to the principal contractor.
Who needs a Letter of Good Standing on a construction site
The short answer: every employer working on the site, in any capacity. The Construction Regulations do not distinguish between main contractors, subcontractors, or specialist trades. The categories include:
- The principal contractor itself— appointed by the client, responsible for the whole site.
- Subcontractors— electrical, plumbing, HVAC, waterproofing, finishes, and every other trade engaged directly or indirectly by the principal contractor.
- Labour brokers and labour-only subcontractors — even though they do not supply materials or supervise the work, they are the employer of the workers on site and must have COIDA cover.
- Specialist contractors— scaffolding erectors, crane operators, demolition teams, and others engaged on a specific scope.
- Freelance tradespeople with any staff — a sole proprietor who brings even one apprentice or assistant onto the site is an employer for COIDA purposes.
The only employer who genuinely does not need to register is a sole proprietor who works entirely alone and brings no workers, apprentices, or casual labour onto the site. In practice, most principal contractors still ask — because their site-access rule is simply “no letter, no site.”
What a principal contractor actually checks
Before a contractor steps onto a managed site, the principal contractor typically verifies the following, and keeps copies on the site file:
- The contractor's current Letter of Good Standing
- The expiry date on the letter
- The Compensation Fund reference number on the letter
- A match between the name on the letter and the contracting entity
- Equivalent letters for every subcontractor the contractor brings onto the site
An expired letter — or a letter in a different business name — is treated the same as no letter at all. The contractor does not start work until the correct letter is produced.
The chain: why subcontractors need letters too
Regulation 7 cascades through the contracting chain. The principal contractor must verify its contractors. Those contractors, if they engage their own subcontractors, must verify those subcontractors. The duty moves down the chain with the engagement.
In practice this means the subcontractor you appointed for waterproofing must produce a valid Letter of Good Standing to you before they bring their crew onto your section of the site. And if you cannot produce their letter when the principal contractor asks for it, the principal contractor is entitled to remove your crew from the site.
What happens when a worker is injured and the letter was not on file
When a construction injury is reported to the Compensation Fund, one of the first things the Fund checks is whether the injured worker's employer was registered and in good standing at the time of the injury. If the employer's letter was lapsed, the Fund can invoke Section 89against the party that engaged them — usually the principal contractor.
That liability is not a notional risk. The compensation payable under COIDA for a serious injury or fatality runs into the hundreds of thousands of rands and can include monthly payments for the dependants of a deceased worker for years. Section 89 can apportion all or part of that cost to the mandating party.
A Letter of Good Standing on file at the time of injury is the evidence that proves the principal contractor verified the contractor was covered — and the reason Section 89 cannot be invoked against them.
The practical site-access protocol
Most well-run construction sites apply a simple protocol that keeps the risk managed end-to-end:
- Before day 1 of any scope of work, collect a valid Letter of Good Standing from every contractor and subcontractor. Keep it on the site file.
- Diarise the expiry dateof every letter. A letter expiring mid-project must be renewed before it lapses — the contractor is responsible for getting the new letter, but the principal contractor has to chase if the contractor forgets.
- When a letter expires,suspend that contractor's site access until the new letter is on file. Continuing to allow access to an employer without cover re-creates Section 89 exposure on every day worked.
- Audit the file quarterly.Mistakes happen — expired letters get left on file unnoticed. A quarterly review catches them before an inspector or an injury does.
- Keep the records for at least five years after project completion. Inspectorate audits and compensation claims can arise years after a site has closed.
If you are the contractor who needs to keep the letter valid
As a contractor, the single most effective thing you can do is file your Return of Earnings as soon as the submission window opens on 1 April, not on 30 June when everyone else is rushing. Because the assessment has to be raised and paid before a new letter can issue, late filers frequently find themselves with a lapsed letter heading into the busiest construction months.
If your letter has already lapsed, read our separate guide to recovering an expired Letter of Good Standing.
What about the OHS Act and the Construction Works Permit?
The Construction Regulations sit under the Occupational Health and Safety Act. For large sites — broadly, those running 180 days or longer, or employing 1,800 person-days of work, or involving risks like excavations or explosive demolition — the regulations require the client to apply for a Construction Works Permitbefore work starts. Applications must include site-specific safety documents and evidence of every contractor's COIDA compliance.
In other words, the Letter of Good Standing is not only a site-access document — it is also part of the paperwork the Department of Employment and Labour looks at before granting the permit. A missing or expired letter can delay permit approval and therefore the project itself.
Track every contractor's letter in one place
Principal contractors and main contractors use ClearComply to track the compliance status of every subcontractor on site — COIDA Letter of Good Standing, CIPC registration, tax status — with automatic reminders before any letter expires.
Frequently asked questions
Do labour-only subcontractors need a Letter of Good Standing too?
Yes. The Construction Regulations apply to every contractor and subcontractor on site, regardless of how they are engaged. Labour brokers, labour-only subcontractors, specialist subcontractors, and freelance tradespeople all need valid COIDA registration and a current Letter of Good Standing before they step onto a site.
I am a sole proprietor with no employees, working alone on the site. Do I still need one?
If you genuinely work alone and have no staff, COIDA registration is not required by law. But most principal contractors will still ask for a Letter of Good Standing because their internal site-access rule is simply “no letter, no site.” In practice, a sole-operator tradesperson in construction typically has to register voluntarily to keep working.
The principal contractor says my letter is not enough — they want my subcontractors to have letters too. Is that correct?
Yes, and it is enforceable. Regulation 7 of the Construction Regulations puts the onus on the principal contractor to verify that every contractor on site is COIDA compliant. If you are a contractor who uses subcontractors, you have to collect and hold a valid Letter of Good Standing for each of them before they step onto the site.
What is Section 89 of the Compensation Act and why does it matter on a construction site?
Section 89 creates what the industry calls mandator liability. If a contractor you engaged is not registered with the Compensation Fund, and one of that contractor's employees is injured on the work you engaged them for, the Fund can hold you liable for the compensation. A Letter of Good Standing is your evidence that you verified the contractor was covered.
How often must I collect an updated Letter of Good Standing from my subcontractors?
Every twelve months at minimum, because that is the maximum validity of a letter. Best practice is to collect a fresh letter at the start of each project and again whenever a letter expires mid-project. Keep the copies on the site file — these are the first documents a Department of Employment and Labour inspector asks for during an audit.
Who is the principal contractor in the legal sense?
The Construction Regulations define the principal contractor as the employer appointed by the client to perform the construction work. In practice this is typically the main contractor the client has engaged. The regulations impose duties on the principal contractor that it cannot contract out — including the duty to verify every contractor's COIDA status.