Employee versus contractor – Fairwork is coming after sham contracting operators

The Fair Work Ombudsman, Sandra Parker, has stated that “the regulator is cracking down on companies that misclassify employees as independent contractors” in a recent media release

“If employers misclassify employees and independent contractors to avoid their lawful obligations or to pay employees low flat rates that undercut the minimum wage, they face serious consequences such as court action, hefty back-payment bills and penalties,” Ms Parker said.

Essentially, an employee is someone who works as a part of your business and a contractor is running their own business and making their own decisions. There are some key factors to be taken into consideration when ascertaining whether a worker is classified legally as an employee or a contractor, and simply having an Australian Business Number (ABN) is not one of them. You can refer to the July edition of AAT’s eNews and Views for a comprehensive table of these tests.

The ATO have an online employee versus contractor decision tool that provides clear advice about individual circumstances so employers can make informed decisions about the nature of an engagement with their workers, and comply with the law.