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Defining the relationship between employees and contractors

Defining the relationship between employees and contractors (Last Updated On: October 6, 2015)

Independent contractors are heavily relied upon in Australia. The nature of seasonal and farm work that dates back generations is testament to this, such as hiring a neighbour to help shear sheep. Now a days it is no longer a friendly chat between mates but an agreement properly characterised and recorded.

There have been many problems associated with independent contractors and this is mainly because the true nature of the relationship is hard to classify. This relationship between employer and contractor can change over time and if the negotiation and contractual proceedings is not updated, breaches in the Fair Work Act or sham contracting may result. Penalties for such incidences are $51,000 for corporations and $10,200 for individuals.

Who is an independent contractor?

An independent contractor is defined as being engaged under a contract for services, as opposed to an employee who works under a contract of service. A master servant relationship is defined and the totality if the relationship is considered when determining the status of the relationship. This is why it is so important to clearly identify and record the relationship status.

Employsure’s tips on how to identify an independent contractor:

Employers who answer yes to the following questions should consider redefining your relationship with your independent contractors:

  • Is the individual required to wear a uniform?
  • Does the individual have limited control over how they conduct their work?
  • Does the individual use equipment supplied to them?
  • Are weekly hours and times of work set by the Company?
  • Does the individual receive annual leave, personal/carers leave and long service leave?
  • Does the individual receive superannuation?
  • Are they engaged on a continual basis?

If you answered yes to any of the above questions you are at risk of misrepresenting an employment relationship and may have hired an employee instead. You need to review the totality of your contractual relationship.  Employsure supports business owners and employers in implementing clear contracts and ensuring that both parties act in accordance with the Fair Work Act. If you would like to review your relationship with your independent contractors, call Employsure today on 1300 651 415.

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