Understanding Australian Law

About Me

Understanding Australian Law

Hello, my name is Nigel and this is my law blog. The law can be a complicated and complex thing to try and understand, especially if you are not a trained lawyer. I am not a legal professional but I take a deep interest in the law. It all started when my uncle was involved in a lengthy court case and I decided to find out a little bit more about it. I started reading a legal book and didn't stop. I am fascinated by the law so I decided to start a blog so I could share my passion with others.

As a Business Owner, Do You Exercise Too Much Control Over Your Contractors?

If you are a business owner, here is an important question. When is a contractor not a contractor? Answer—when they are an employee! As obvious as that may sound, it's a problem waiting to happen with very real consequences if you get the definition wrong over a long period of time. What do you need to know about this conundrum?

Employee or Contractor

When you need people to help you run your business, you have two choices. You can employ them (with all the legal and financial implications), or you can seek to engage them as an independent contractor. In the latter case, they can perform the services for you, but they are responsible for taxes, national insurance and other obligations and, principally, are free to work for other entities.

The Easier Option

Clearly, the contractual situation is less demanding for the business owner, but they will need to be very careful to define the relationship and how they actually interact with the contractor. They need to remain as "hands-off" as possible while still ensuring that the contractor performs the work to their liking. It can be a fine line, but if you cross it, huge problems can arise.

Employee Protection

The tax authority will always want to get their fair share of revenue, and government regulators want to ensure that each person is as protected as possible. For example, they will always insist that a bone fide employee keeps up with superannuation and the employer is required to contribute. An employee is subject to unfair dismissal provisions and may also be eligible for sick leave and holiday entitlements. None of these situations may apply when a business owner takes on the services of an independent contractor, so long as they do not exercise too much control in the situation.

Crossing the Line

Some business owners try to engage a contractor and exercise full control over what that individual does. They may require them to follow certain procedures at all times and engage them to such a degree that the individual is no longer able to work elsewhere. In this type of situation, the contractor could now be viewed as an employee, and this is where the situation gets difficult. If something happens and a court rules that the contractor is indeed an employee, you may need to account for annual leave payments, sickness payment, overtime and superannuation contributions.

Making Sure

How do you know if you are near that line or may even have crossed it? If you're unsure, talk to a business lawyer as soon as possible.