Employee or Contractor?

by May 3, 2022All Posts, Fair Work, Human Resources

As a business owner, it is your responsibility to know the capacity in which your employees work, ensuring that you fulfil your legal obligations in providing employees with the correct entitlements. If you fail to do so, Fair Work claims may arise resulting in investigation and potential penalties/compensation.

Recently the High Court of Australia determined that two employees were better categorised as contractors based on the details within their written contracts, seeing them ineligible for their claim to receive employee entitlements. This detracts from the usual consideration of the relationship between employee and contractor and demonstrates the need to ensure that contracts reflect this accurately. Reflecting factors such as:

  • Employee work hours as regular and defined by the employer, opposed to contractors who define their own hours.
  • Employees work at the direction of the employer and complete tasks that are assigned to their role, where contractors often engaged for specific tasks with work ceasing upon task completion.
  • Payment for employees is regular and received via scheduled payment and will be paid regardless of performance, however contractors often quote for work and payment is made in response to adequate task completion and receipt of invoices.
  • There is no financial burden for employees as they are the responsibility of the employer, opposed to contractors whom are responsible and liable within their own insurance and contributions to both Superannuation and Tax, assuming the risk of both making, organising and deducting money.
  • Employees are given a provision of tools or an allowance for such, contractors will have their own equipment and assume liability and maintenance.
  • Leave entitlements are only applicable to employees, there are no entitlements or benefits received by contractors.

It is important that business owners revisit current employment agreements to ensure that worker classification is correct and evidenced within the clauses and role descriptions. Assurance HR act as a third-party advisor for many businesses, effectively assisting in the development of both position descriptions and employment contracts specific to role and type of employment. Contact us today on 1800 577 515 to discuss your new hire and human resource advisory needs.

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