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Contractor vs Employee – Another ‘contractor’ relationship deemed employment

The Fair Work Commission (FWC) has put businesses on notice yet again that defining someone as a contractor and having both parties agree to this arrangement does not definitively mean the person is not an employee.

In a recent decision, the FWC classified a sales director for a Perth-based manufacturing company as an employee even though he had a signed contractor agreement in place.

It is a good reminder to think about how you engage your contractors.

What does the FWC look at when considering the employee/contractor question?

The FWC considers a wide range of factors to determine which category a worker falls under. In the recent case, this included whether there was a definitive period of employment, the amount of business capital allocated to the worker, how the worker represented the business in the course of his work, and the level of control the business had over him.

What happens if you get it wrong?

If your business is paying a person as a contractor when they are in fact an employee, you will likely be liable for back payment of entitlements, super and payroll tax. Fines will also follow.

The Government is increasing funding to investigate these types of employment relationships so make sure that you have all your ducks in a row to avoid being penalised.

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