When using an independent contractor in your business, you have to make sure that the person really is an independent contractor. An independent contractor by definition, is self-directed, defines how the project will proceed, brings their own tools, can derive profit or loss from their relationship with you, can sub-contract out further, does not work solely for you and carries risk involved with their work.
While an employee on the other hand, generally works solely for you, are fully directed in the work they are going to complete, works the days and hours you direct, are paid a wage, are not able to derive profit or loss from their relationship with you, work in your workplace using your tools, bear no risk for the work they complete and represents your business.
Differing tests for differing areas of the law are complex when it comes to contracting. The tests utilised by the different agencies for PAYG, as opposed to Super, as opposed to Payroll Tax, are slightly different. That is why there is no blanket answer for how to define whether your worker is a contractor or employee. It all depends on the situation. You may be more protected if your contractor is a Pty Ltd company, but even then, the situation can be involved.
Where there are certainly major risks is when the worker is an individual, is working only for you and you are directing their work – like an office worker, or where their work includes physical labour (this can be working like a tradie or mental/artistic work like a designer). In these cases you need to look carefully at implications such as superannuation which you probably should be paying. Speak to your accountant for advice, but don’t wait till you have a claim at your doorstep.
That is why so many people use CIRCLE Recruitment & HR, in regards to workers, because an on-hired worker offers you all the perks of a contractor, but your contracting relationship is with us, not the worker. We are a true independent contractor; we don’t work only for you, we advise you when our worker is available, we can derive profit or loss, from our relationship with you (very little profit of course), we can sub-contract out further (by replacing your worker at any time), and we are a Pty Ltd company. For your part, you can increase the hours your worker works, decrease the hours, change worker, stop the worker with one hours notice, pay only on the hours the person works: this is called an ‘on-hired’ employment arrangement and you carry no risks, because we are the independent contractor and we employ the workers.
There is one area we share risk with you and that is Work Health and Safety. This is because under the law, while we are the employer, you are classed as a PCBU – Person carrying on a Business or Undertaking and the law recognises independent contractors as ‘workers’. Therefore we both have a duty of care to the worker and we work collaboratively with our clients to manage WHS risk. We do this by involving our clients in a WHS checklist, that we complete on site and assisting them to utilise our HR division for the creation of general Work Health and Safety Policies as well as creating a safe workplace.
We really are a one stop Employment Shop: True independent contractor, able to supply white collar workers and assist you to build your compliance in the only area of risk you hold!
Important Note: These articles have been prepared for general circulation and are circulated for general informational purposes only; these articles should not be regarded as business or investment advice. The articles represent the views of the writers and are subject to change without notice. Additionally, while every care has been taken in the preparation of the articles no representation or warranty as to accuracy or completeness of any statement is given. An individual or organisation should, before any business or investment decision is made, consider the appropriateness of the information in this document, and seek professional advice, having regard to objectives, situation and needs. This document is solely for the use of the party to whom it is provided.