Employees vs Independent Contractors Australia

Updated as of 2017

This article provides a thorough outline of the law, rules, appropriate structures and trends affecting employment and independent contractor arrangements.

Part II of the article discusses the legal framework regulating contract and employment arrangements in Australia, whilst part III discusses the practical aspects of re-characteri- sation and its associated legal risks and exposures.

Part IV identifies and discusses the appropriate structures and methods of structuring independent contracting arrangements. Finally, part V of the article looks at recent trends and the future direction of the regulation of employment and independent contractor arrangements in Australia.

Introduction

Employees and independent contractors in Australia separately enjoy benefits, and owe duties and liabilities that are unique. Independent contractors are, in effect, small businesses and therefore they are not  protected  from  unfair  dismissal,1  nor  are they entitled to receive employment benefits provided under statute and other industrial awards, including annual leave and superannuation. In addition, companies that engage independent contractors may be insulated from public liabilities arising from the conduct of their contractors,2 insure their contractors for injuries sustained in the course of employment3 and have significantly reduced administrative obligations in relation to reporting and record keeping.4

For these reasons, together with increasing labour costs, independent contracting arrangements are attractive to businesses seeking to maintain competitiveness and labour flexibility in the Australian market.

However, due to the scope for exploitation and diminished responsibility, Australian regulatory bodies have, as a matter of public policy, adopted a strict position against the misuse of independent contracting arrangements in the private sector5 and Australian Courts have followed their example through the imposition of increasingly large penalties against companies and managerial staff for engaging in sham contracting practices. Additionally, statutory entitlements and protections for employees have provided scope for Courts and Tribunals to award significant damages and compensation to persons that have been mischaracterised as independent contractors.