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Employee vs Contractor: What More Changes Might Mean for Your Business

  • Laura Racky
  • Apr 7
  • 2 min read

Classifying workers correctly is more important than ever. Simply relying on your contract is not enough — what matters is how the working relationship plays out in practice.


Why Classification Matters

Whether someone is an employee or an independent contractor affects your obligations. For example:

Superannuation and leave entitlements.

PAYG tax withholding.

Workers’ compensation and insurance.

Compliance with the National Employment Standards (NES).

Unfair dismissal protections.

Misclassification can lead to fines, back pay claims, audits, and reputational risk.


Interesting Developments

In 2022, two High Court cases (Personnel Contracting and Jamsek) suggested the terms of a written contract could be decisive as to whether a person was an employee or a contractor, as long as the contract was legitimate.


But that position was short-lived.


The Fair Work Legislation Amendment (Closing Loopholes) Act 2023, effective early 2024, has clearly reversed this — courts must now assess the true nature of the relationship, beyond the written contract. How the parties behave in practice is once again the determining factor.


Factors Courts Will Consider

Indicators of employment include:

  • How much control the business has over how, when, and where work is performed.

  • Whether the worker can subcontract tasks.

  • Who provides tools and equipment.

  • Whether the worker operates independently or is embedded in the business.

  • Who bears commercial risk.

  • How the worker is paid (e.g. hourly vs per project).

  • Whether ongoing work is expected.


What Steps can you take to Protect Your Business?

Review existing contracts: Do the terms align with the actual working relationship?

Audit current contractor arrangements: Are these workers truly independent?

Educate internal teams: HR and hiring managers must understand these legal concepts.


LLGOLD Tip: Now is the time to reassess your contractor engagements. Seeking advice can help ensure compliance and avoid costly missteps.

 
 
 

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