Contractor or Employee? Engage workers correctly to avoid sham contracting
Before you engage a consultant or contractor to work for the University, stop and consider whether an independent contractor relationship is appropriate. You may find that the person should be hired as an employee.
Under the Fair Work Act 2009, there are serious penalties for employers (and individuals) who engage workers as contractors when they are really functioning as employees. This is commonly referred to as ‘sham contracting’.
How to determine if a worker should be a contractor or employee
Unfortunately there are no clear legal definitions which help distinguish between a contractor and an employee. You need to look at the relationship as a whole and assess how it will work practically against some key factors. Keep in mind that it's the reality or substance of the relationship that is most important, not what you label it.
Here are some key factors to help you decide whether a worker should be engaged as a contractor or employee:
Employee | Contractor |
---|---|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Things to look out for
While it can be hard to tell the difference, there are some warning signs which may indicate that an independent contractor should actually be engaged as an employee. In particular, pay attention to individual contractors who:
- are repeatedly engaged to perform core business work like teaching and administration;
- are required to work at the University’s premises during standard business hours;
- use the University’s resources;
- are paid fortnightly; or
- do not have clients outside the University.