Contractor or Employee – are you in a sham contracting arrangement?
A business or company may have many types of workers on their payroll. Permanent or casual, full time or part time, flexible working arrangements and contractors.
If you are a contractor it’s time to have a think about the arrangement you have.
The ATO has one view of what a contractor is verses an employee and in many ways the Fair Work legislation holds the same views. In employment law it is important to consider the differences between employees and independent contractors.
Key Indicators of being a Contractor
- You will run your own business with a view to promote your business and run a profit.
- You usually have to negotiate the fee and working arrangement and usually work with more than one client at a time.
- You will generally have your own ABN.
- You are in control of your own work
Difference between Employee and Contractor
The difference between employees and contractors can be difficult to figure out, it is not about any one difference it is about looking at the list as a whole and coming to a decision.
|Have your work directed and controlled by your employer||Have a high level of control over how the work is done|
|Work set or standard hours, remember casual work hours can vary||Can hire others to do the work or assist you to do the work|
|Usually have an ongoing expectation of work||You have agreed on the hours required to complete the job|
|Bear no financial risk – its covered by the employee’s insurance||Usually engaged for a specific time or task|
|Are provided by your employer all the tools or toll allowance||You bear the risk of making a profit and you usually bear the risk of injury or poor work|
|Have your income tax deducted by your employer||You use your own tools and equipment|
|Are paid wages or a salary regularly||You pay your own taxes and GST|
|Are entitled to paid leave||You have an ABN and submit invoices|
|Usually entitled to superannuation||You don’t receive paid leave|
What if I think I am an Employee but I am a Contractor?
If you are in a working situation where you are a contractor but think based on the above table, you are actually a contractor you could be in a sham contracting arrangement. There are things that you can do to help resolve this problem, give us a call for a free 30-minute consultation to find out what your options are.
Sham contracting is illegal, and it is also illegal to:
- claim that an employee is an independent contractor when they are not;
- say something false to convince you to become an independent contractor;
- dismiss or threaten to dismiss you if you don’t become a contractor;
- dismiss you and then hire you as a contractor to do the same work.
If this article has brought up any questions that you may be in a sham contracting arrangement, give us a call for a chat.
Sources from Fair Work Ombudsman
The information in this document, broadcast or communication is provided for general guidance only. It is not legal advice, and should not be used as a substitute for consultation with professional legal or other advisors. No warranty is given to the correctness of the information contained in this document, broadcast or communication or its suitability for use by you. To the fullest extent permitted by law, no liability is accepted by the publisher for any statement or opinion, or for an error or omission or for any loss or damage suffered as a result of reliance on or use by any person of any material in the document, broadcast or communication.
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