WE frequently receive enquiries from people who have been unfairly treated whether in relation to pay, conditions or termination in the course of employment and are seeking a remedy to compensate them.
The importance of the difference between employment and contracting include instances where a person believes he or she is an independent contractor, but is actually an employee or vice versa. Both can have significant taxation and legal liability implications. This matter is also important for employers to consider, as superannuation, insurance and other obligations may arise, depending on how a person is classified.
While the nature of a person's employment may seem obvious to them, at law there are a number of considerations and merely calling somebody an "employee'' does not make them so. It is important to note that no single factor will determine if somebody is an employee or an independent contractor, rather the following points (among others) must be considered together.
Performance of Work: An employee will usually perform work at the direction of their employer and solely for that employer. An independent contractor controls the rate and type of work they perform and may work for a variety of customers.
Hours of Work: An employee will work a set number of hours at the direction of an employer. A contractor will work to complete a task or set of tasks, rather than working to a standard set of hours.
Method of Work:An employee will have an ongoing role to perform in the course of their employment. A contractor is usually engaged for the purposes of completing a specific task.
Risk: An employee bears no financial burden for the performance of his or her work and this is usually the responsibility of the employer. An independent contractor usually bears the responsibility and liability of work poorly performed or injuries sustained during that employment.
Superannuation: An employee is entitled to have a contribution paid to a nominated superannuation fund by the employer. An independent contractor has the responsibility of handling their own superannuation.
Equipment and Uniforms: An employee will usually have equipment required to perform their role supplied by their employer and may be required to wear a uniform supplied by that employer. An independent contractor uses their own tools and equipment.
Taxation: An employer deducts income tax from an employee's wages. An independent contractor attends to compliance with his or her own taxation obligations, usually through an accountant.
Method of Payment: An employee is paid regularly, for example weekly or fortnightly. An independent contractor has obtained an ABN and is required to submit an invoice for payment.
Leave: An employee is entitled to receive paid leave. An independent contractor does not receive paid leave and is able to take leave as and when he or she wishes.
No single point is conclusive in determining whether somebody is an employee or independent contractor.
A practice frequently seen is what is referred to as a "sham arrangement" or "sham contract", where an employer deliberately disguises an employment relationship as one of independent contracting to avoid the legal obligations that stem from employment.
If you're uncertain as to the basis on which you are employed, you should seek legal advice or advice from appropriate government bodies as this will have a significant impact upon remedies which may be available.