HR
Contractor or employee? Workplace relations legal expert Paul O’Halloran looks at the important difference between being classified as an
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employee or an independent contractor.
t is important to carefully review contractual documents when entering into professional employment or engagement opportunities in the industry, to ensure the nature of the working arrangement is lawfully characterised. When individuals are incorrectly classified as independent contractors, as opposed to employees, they can lose out on employment entitlements such as annual leave, personal leave, overtime, penalty rates, superannuation guarantee contributions and other benefits. So what is the difference? There is currently no single legal definition in Australia for whether a worker is a contractor or an employee. Instead, if the true nature of a working arrangement is challenged by a worker, the courts or a tribunal will consider a ‘multi-factor’ test. The test is based on the fundamental fact that when services are being provided by the independent contractor to another business, an independent contractor provides those services whilst working in and for his/her own business. By contrast an employee provides personal services whilst working in and for the employer’s business. There are six key factors you can consider to determine if what is being offered is an employment or contractor arrangement; 72
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Control: The more your work is subject to direction as to how and when it is to be done, the more likely you will be seen to be an employee. Delegation: No capacity (or limited capacity) to delegate your work to others tends to be a strong indicator of an employment relationship. Advertising: If you are represented and portrayed to the public as carrying out the activities of the business that engages you, by way of uniforms, logos etc, this will be a strong indicator of an employment relationship. Payment: A regular stream of income that is the same or similar each week is usually inconsistent with a person being an independent contractor. Contractors are often required to provide a fixed quote for a specified outcome, rather than receive hourly pay. Single source of income: If you are receiving a substantial percentage of your income from only one source (such as a golf club), it is far more likely you will be considered an employee of the club rather than an independent contractor. Incorporation: Most true independent contractors provide their services through an incorporated entity.
AUSTRALIAN TURFGRASS MANAGEMENT 21.3
Although the totality of the relationship needs to be considered, the bottom line is that if you answer ‘no’ to the following two questions, you are unlikely to be an independent contractor: l Are you performing the work as an entrepreneur who owns and operates your own business? l In performing the work, are you working in and for your own business as a representative of that business and not of the business receiving the work? If the answer to both is ‘yes’, you are likely to be an independent contractor. If ‘no’, then you are likely to be an employee. Organisations misrepresenting an employment relationship as an independent contracting arrangement are subject to prosecution and penalties under the Fair Work Act 2009 (Cth) for ‘sham contracting’. A sham arrangement may exist if the contractor’s company has no assets, is effectively run by one person, that person performs all the work for one hirer, and the relationship with the hirer is ongoing. Members who have concerns about the nature of their work should seek specialist advice. Editor’s Note: Paul O’Halloran is partner and accredited specialist (workplace relations) at Colin Biggers & Paisley.