Sham Contracting on FWO 2021/2022 Priority List
In addition to the main priority of supporting workplaces recovering from the impacts of COVID-19, the Fair Work Ombudsman (the government agency responsible for regulating workplace matters) has announced their priority issues for 2021-2022.
As a priority issue, the Fair Work Ombudsman (the FWO) will focus on sham contracting where workers are falsely engaged as independent contractors instead of employees.
What is sham contracting?
Sham contracting is a term used to describe the situation where a worker is engaged by a business as an independent contractor when in fact, they should be engaged as an employee.
Sham contracting can be done knowingly or recklessly by an employer and set up by employers who are avoiding the responsibilities for paying
- superannuation
- annual leave
- personal leave
- long service leave
- and other employment entitlements to individuals.
Contractor versus Employee
Determining whether an individual is an employee or an independent contractor unfortunately is not a straight forward matter and requires an assessment to be made on each individual’s circumstances. However, there are some significant differences between the two arrangements including:
Employee
- Generally works for only one business
- Has set hours
- Performs work under the direction and control of their employer
Independent Contractor
- Works for multiple businesses/individuals
- Hours negotiable based on tasks required
- Largely autonomous and has a high level of control over the work that they do
- Has the freedom to sub-contract or delegate their work.
There are a number of other indicators that can be considered when assessing the employment arrangement. The Australian Taxation Office has a helpful employee/contractor decision tool to assist in working out whether an individual is an employee or an independent contractor.