Maybe you’ve scored a big new contract or you need some help with existing work. Either way, if you’re thinking of hiring subcontractors, you’ll want to know you’re doing the right thing by them and the law.
How is a subbie different from an employee?
An employee works for you and is ‘on your books’. With an employee, you have a legal obligation to withhold PAYG tax from their wages, pay their super, and take responsibility for their work, i.e. if they make a mistake, you need to sort it.
A subbie, on the other hand, has their own ABN, looks after their own tax and super, is legally responsible for their own work, and supplies most, if not all, the equipment needed to do their job. Subbies also don’t get other entitlements that employees get, like holidays, unless included in the terms of the contract.
Obviously, there are a lot of benefits to hiring subbies, although they do tend to be more expensive. But sometimes the line between employee and subcontractor is blurred, and that’s where you need to be careful.
The rise and rise of sham contracting
Sham contracting is when an employer tries to pass off an actual employee as a subbie. This is a big no-no under the Fair Work Act 2009, and it incurs some very serious penalties.
The Independent Contractors Act 2006 also ensures that genuine subcontractors are not treated as employees, and vice versa, so it’s very important to establish what sort of working relationship you have.
The Common Law Test
There is a Common Law test you can use to determine whether or not a person is a subcontractor. In general, subbies:
- run their own business
- control their own working times
- decide how and where they undertake work
- provide their own tools and equipment
- may pay others to carry out work on their behalf
- don’t necessarily work standard hours
- submit invoices for payment
- take responsibility for mistakes made on the job
- can take on numerous contracts at the same time
- have the right to employ an apprentice or trainee
- pay and look after their own GST and income tax
- pay and look after their own super
- have their own insurances, eg. Public Liability and Workers’ Comp
- don’t get paid holidays or when away sick
Want to know more? Contact the Independent Contractors Hotline on 1300 667 850.
Source: GoGetta