Outsourcing is a major feature of today’s labour market and many companies and businesses hire independent contractors with the intention of avoiding a whole raft of employment obligations including annual leave, long service leave, sick leave and statutory payments such as workers compensation, superannuation and payroll tax.
But just because an employer has outsourced its services and personnel by engaging a contractor, does not mean they have outsourced all their responsibilities.
Genuine independent contractors run their own businesses and control how and when they work and for whom. In contrast employees are usually subject to control by their employer as to how, when and where their work is performed. Their rate and method of pay is controlled by their employer and cannot pay someone else to perform their work.
However, even though a worker may be labelled a ‘contractor’ as opposed to an ‘employee’, depending on their individual circumstances a contractor may be treated as an employee for the purposes of workers compensation and other workplace entitlements.
The criteria for assessing whether a contractor could be deemed an employee includes but is not limited to the following:
1. The contractor does not have employees or subcontract out the work.
2. There is an ongoing exclusive nature to the agreement between the contractor and the business or company
3. Hours of work are determined by the business or company and not the contractor
4. The rate and method of payment are set by the business or company and not the contractor
5. The contractor wears a uniform supplied by the business or company
6. The contractor uses tools and equipment provided by the business or company
No one factor is determinative and the totality of the working relationship is taken into consideration.
In a well known High Court case, a bicycle courier who rode his own bicycle and was paid according to the number of successful deliveries he made but who had to wear the company uniform and was told when to work and how much to charge was deemed to be an employee despite being a contractor by title.
Care should be taken to properly describe the true nature of an employment arrangement in an employment contract as opposed to merely relying on a title given to the worker. Contact CBD Law to discuss your employment arrangements.