Independent contractor or employee?

The following extract is from the article Independent contractor, Labour Hire Worker
or Employee? First published in the Wine & Viticulture Journal, November/December 2015. Author Sarah Hills

EMPLOYEE OR INDEPENDENT CONTRACTOR
Just because a person wishes to be engaged as a contractor, has an ABN number and you enter into an agreement calling them an ‘independent contractor’ does not automatically mean they are one. Often relationships are disguised in being given a label when, in fact, the relationship in practice is something
different. The courts look at a number of indicators in the relationship and weigh them up to assess who holds the control in the work or task to be performed.

An employee performs work under the ‘control’ of another person in exchange for payment for the services he or she provides. Indicators of an employment relationship include:
• Control by the employer. For example, instruction as to how to carry out duties, uniform and hours of work, etc. Control indicates an employment relationship.
• The expression of the relationship by the parties in writing. For example, calling a contract an ‘employment contract’ or a ‘service agreement’ is persuasive but not determinative.
• The terms of the contract. For example, is paid annual leave provided? Employment entitlements such as annual leave, long service leave and parental leave are employment entitlements.
• Was the worker in business on his/her own account? Were tax invoices rendered? Did the worker use his or her own ABN? Is there an entrepreneurial-like element about the business?
• The worker operating an independent business indicates that the worker is an independent contractor.
• Whose tools and equipment are being used?
• Was the worker required to work exclusively for the company? Exclusivity of arrangement indicates an
employment relationship.

Independent contractors need to manage their own business and acquire their own insurance for their own negligence and own income maintenance/protection. They are distinguishable from employees (and labour hire workers) by the fact that they take personal risk associated with their business activities. While an independent contractor is responsible for their own business (including any employees they employ) when on your site they have a joint responsibility with you for your employees with regards to work health and safety. The importance of knowing who you are contracting with is highlighted by the fact that an intentional act to disguise an employment relationship by calling the employee an ‘independent contractor’ is an offence called ‘sham contracting’. If sham contracting is proved there are heavy penalties to be incurred by an employer (both as a company and/or the individuals managing
the company) under the Fair Work Act 2009.

To access the full article, visit Wine & Viticulture Journal.

Posted in HR advice, Legislation |

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