Independent contractor or employee? We get that question all the time. It's important to get it right because of the consequences. One example is "sham contracting" click here
Recently, Fair Work Australia (FWA) considered the question for the purposes of the "small business employer" exemption for accessing redundancy pay. In Kuat Chee v Renown Business Solutions Pty Ltd an employee claimed entitlement to a redundancy payment on termination. The employer, Renown, claimed it was a "small business employer" because two "contractors" did not count as employees. FWA formed a different view.
FWA considered indicators including issues of control, exclusivity, whether the work can be delegated or subcontracted, whether income tax is deducted from payment, whether the "contractor" represents themselves on behalf of the "employer" and whether the "contractor" runs their own business.
The "contractors" provided bookkeeping and IT services via their own businesses. Both invoiced Renown, received gross payments without the deduction of income tax and provided services to other businesses. The "contractor" who provided IT services used his own equipment.
Sounds like typical contracting arrangements right? Wrong!
FWA held that both "contractors" were properly characterised as employees. This was because they: (a) were subject to Renown's direct management and control; (b) had a dedicated workspace within Renown's premises; (c) used Renown email addresses and therefore held themselves out as being part of Renown's business; (d) worked regular hours and days from week to week; and (e) received an agreed rate and therefore did not quote for the provision of their services. Additionally, Renown contracted out the IT service provider to its clients to provide IT services in the same way it contracted its own employees to undertake consultancy work for its clients.
In this case, the consequences of improper characterisation meant the difference between having to pay, and not having to pay, a redundancy entitlement. Additional consequences could include a prosecution under the "sham" contracting provisions resulting in fines of up to $33,000 per breach for a company and up to $6,600 per breach for an individual involved in the breach. This is one question you don't want to get wrong.
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