With more and more Australian businesses relying on a flexible workforce, protecting genuine employees from sham contracting arrangements has never been more important. But despite a recent crackdown from the Fair Work Ombudsman and Australian Tax Office, many employers continue to feign ignorance as to their responsibilitiesSham contracting is used to describe the deliberate mischaracterisation of an employment relationship (i.e. a relationship between an employer and an employee) as a contractor relationship (i.e. between a principal and independent contractor).
Are You Self-Employed or an Employee?
EmployeesThe factors that are indicative of an employee are that they:
- have their work directed and controlled by their employer
- work set or standard hours (casual employees hours can vary from week to week)
- usually have an ongoing expectation of work
- bear no financial risk – it’s covered by their employer’s insurance
- are provided by their employer with tools or a tool allowance is provided
- have income tax deducted by their employer
- are paid wages or a salary regularly
- are entitled to paid leave.
Independent contractorsThe factors that are indicative of independent contractors are that they:
- have a high level of control over how the work is done, including the choice to hire others to assist
- agree to the hours required to complete the job
- usually engaged for a specific task or time
- bear the risk of making a profit or a loss and usually bears responsibility and liability for poor work or injury and usually have their own insurance
- use their own tools and equipment
- pay their own tax and GST
- have an ABN and submits invoices
- don’t receive paid leave.