This month’s VIP update focuses on an area that can create significant unexpected liability for employers: the difference between an employee, a contractor and a contractor who may still attract superannuation obligations.
There are also several timely Fair Work reminders worth checking across your workforce.
Contractor or employee? The label isn’t enough
Having an ABN, submitting invoices or signing an agreement headed “Independent Contractor Agreement” does not automatically make someone a contractor.
The actual legal relationship matters.
Depending on the arrangement, relevant factors can include:
- how much control the worker has over how the work is performed;
- whether they can delegate or subcontract the work;
- who provides the equipment and carries the commercial risk;
- whether they operate an independent business; and
- the terms and practical operation of the contractual relationship.
VIP action: If you regularly engage individuals as contractors — particularly people who personally perform ongoing work within your business — it is worth reviewing those arrangements rather than assuming the contract or ABN settles the question.
Contractors and superannuation — a separate question
This is where businesses can get caught.
A worker may be treated as a contractor for some purposes but still be entitled to employer superannuation contributions.
In particular, superannuation legislation can extend to certain people working under contracts that are principally for their labour.
That means the correct question isn’t simply:
“Are they an employee or contractor?”
It is also:
“Does this particular contracting arrangement create a superannuation obligation?”
If super should have been paid but wasn’t, the potential exposure can extend beyond simply paying the original contributions.
VIP action: If you have individual contractors providing their own labour to the business, send me the agreement and details of how the arrangement actually operates and we can identify whether it needs closer review.
Every minute worked counts
Fair Work has also reminded employers that employees must be paid for all time they are required to work.
That can include:
- mandatory staff meetings;
- opening and closing duties;
- required preparation before a rostered shift;
- work performed after the scheduled finishing time; and
- other activities the employee is directed or required to perform.
Be particularly careful with payroll practices that automatically round start or finish times.
VIP action: Compare what employees actually do at the beginning and end of a shift with the hours being recorded and paid.
Performance problems — deal with them early
Performance issues become considerably harder to manage when concerns have been discussed informally for months but nothing has been properly documented.
If someone isn’t meeting expectations, establish:
Expectation → Gap → Required improvement → Support → Review date
Good performance management should give the employee clarity about what needs to change and provide the business with a clear record of what has occurred.
Ending employment? Check before you act
Before terminating employment, check both the process and the entitlements.
Depending on the circumstances, final pay can include outstanding wages, accrued annual leave, notice or payment in lieu, redundancy and potentially long service leave.
Awards, enterprise agreements and employment contracts may also contain additional requirements.
VIP action: Contact me before communicating a termination decision or final employment date. It is much easier to check the process before the decision is implemented than repair it afterwards.
October compliance check
This month, I recommend checking three things in your business:
- Contractors: Do we have individuals who may actually be employees or who could attract superannuation obligations?
- Working time: Are employees being paid for everything they are required to do?
- Performance: Are current performance concerns being addressed and documented rather than allowed to drift?
If any of these raise a concern, email info@piaa.org.au and we can introduce you to our in-house HR Services Consultant that can work through the appropriate next step as part of your Members Only VIP support. Support is complimentary for Members.
