Contractor or employee? Are you or a client of yours engaging contractors who are really employees? Can you help your clients avoid a risk of costly non-compliance?
I read a report recently written by a Sydney based legal firm. It was interesting as they asserted that when a worker was regularly engaged to provide principally or wholly labour based services, the individual was unlikely to be a contractor unless they meet the following basic criteria.
The Contractor Or Employee Indicators
I have paraphrased the commentary so it is somewhat simplified.
- A contractor advertises their offer proactively on social media or elsewhere under their own individual signage and branding.
- From this advertising a contractor can demonstrate that he/she has generated enquiries and clients via these efforts.
- The contractor’s client and revenue base is extensive.
- A contractor quotes for work with a unit price, not with an hourly, daily, piece (percentage) or commission rate.
- A contractor includes a more than nominal mark up on any materials they supply.
- The contractor contributes significant equipment to the task i.e. tailor- fitted vehicle, backhoe etc.
Recognise The Contractor-Employee Challenge
Where the worker is providing labour-based services, and in the absence of comprehensive indicators like these, the question arises: Are they in fact employees?
In spite of the individual invoicing via an ABN, Company or Trust, or having an independent contractor agreement in place, there is a significant risk of non-compliance.
This means there is exposure under various regulations such as the Tax Act, the Personal Services Income (PSI) legislation and the SHAM contracting provisions of the Fair Work ACT if the individual is actually an employee.
Make Sure That You Consider Your Best Options
You need to make sound decisions when you need to engage contractors; decisions that are right for today and protect the future of your business. There is a better, safe and secure way to engage labour based contractors; A robust, tested and lawful way; and it doesn’t attract the ire of the ATO or the Fair Work Ombudsman.
While this is not legal advice, we offer a no-obligation, free-of-charge contractor or status review to any clients of members of The NCP.
To know more, get in touch with Neil or send an email