Independent contractors can be a cost effective way to structure
or even supplement your workforce, for when times get busy. A
business that has famously used independent contractors is Uber.
They are currently the talk of the town. They use a concept that
matches people who need a lift somewhere.... with a regular Joe who
has a spare seat. Its critics will say it is just like a taxi
service, but without any regulation or safety for passengers.
Whatever you think of Uber (or don't think of it, as the
case may be) the startup has again made the headlines, this time
some of its drivers have commenced an action in California claiming
that they are employees of Uber, not independent contractors and
should be paid reimbursements, such as fuel. The question of
whether a person undertaking work for another is an employee or an
independent contractor is one of the most frequently ask questions
in employment law. From an employers point of view, using
independent contractors over a traditional employee/employer
relationship can be quite attractive- although often paid more on
an hourly or piecemeal rate, there is no PAYG, compulsory
superannuation contribution or insurances obligations. They can be
utilised when the work is there. From an independent
contractor's point of view, it can be more flexible as a
contractor can name their rate, hours and can knock back work if
they chose to.
So what is the catch? Why don't more work places use
contractors? Not all industries have fluctuations in work load and
need a steady work force. Contractors can cost more. And if an
employer gets things wrong, by hiring contractors, that are
essentially working as employees, things can get very expensive
very quickly. The ATO will come knocking for PAYG, interest and
possibly fines. APRA will also seek employee superannuation from
you and when that is late, the fines can be steep. Because of
uncertainty about when a contractor will actually be deemed an
employee, many workplaces are hesitant to use contractors, however,
don't throw the baby out with the bathwater!
When using independent contractors, there are a few things that
employers can do to make sure those contractors really are
Get legal advice tailored to your industry and specific work
place. Maybe independent contractors are not going to work for
Use a detailed agreement that clearly sets out the employment
relationship. This must be done by a lawyer who is up to date with
employment issues and decisions.
Once you have your agreement in place- stick to it! It can be
easy to fall into a employer/employee relationship.
Make sure your contractors have their own public liability and
professional indemnity insurances and workers compensation
Don't try to out-fox the tax-man- if the ATO thinks that
there is a sham going on, they have wide reaching powers to decide
that you are using employees and the range of penalties on offer
can be great.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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An employee that refused a reasonable offer of settlement was ordered by the FWC to pay his ex-employer's legal costs.
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