Contractor Engagement – What you need to know!

The advantages of hiring contractors are copious. Contractors provide staffing flexibility, generally have specialised skills that are hard to find in the market and their experience means they can be trusted, for the most part, to carry out the job with minimal supervision. There are also certain financial benefits such the absence of statutory obligations like superannuation, insurance and both holiday and carers leave.

The argument for engaging independent professional contractors is definitely strong. But without a grasp on your obligations as an employer, hiring contractors can be detrimental to your business. Here are some tips to help navigate you through the complexities of contractor engagement.


1. Remember contractors are not employees

Independent professional contractors are exactly that, ‘independent’. They have control over what hours they work, whether or not they work on any given day and for which organisation they work for. An employee doesn’t have that same freedom; they work when they are told and on what they are assigned to. If they choose to not comply with the employer’s requests their position may be at risk.

By expecting an independent contractor to behave in exactly the same manner as employees, you are possibly denying your contractors some rights to which they may be entitled. Also, treating your contractors like employees may result in them being entitled to the same benefits as your employees forcing you to back pay obligations such as super and also potentially putting your company at risk of penalties.


2. Make sure it’s real

Disguising an employment relationship as an independent contracting relationship is illegal. Ensuring that the working relationship you have signed on for is legitimately one between a client and an independent contractor is critical, as if this is not the case, you are potentially avoiding your legal and financial responsibilities – or the other party is, and can possibly face many repercussions.

Law in Australia does not have a simple definition or criteria to determine if a person is an employee or is an independent contractor. In some cases the distinction is extremely hazy. To be safe, if the relationship looks like an employer-employee relationship, it probably is…especially in the eyes of the court.


3. Understand your obligations when it comes to your contractor health and safety

You must ensure the safety of people working in your business at all times. That is a requirement regardless of whether you hire a contractor or an employee. If you fail to meet your Workplace Health and Safety obligations, you could find yourself in legal hot water with your contractors.

Similarly, failing to provide workers’ compensation when you’re required to, your state or territory work, health and safety agencies or your workers’ compensation agency could compel you to pay any avoided workers’ compensation premiums. This, in turn, could put your business in a significant legal and financial bind, depending how large your organisation is. In order to continue your business’ good name, ensure you pay the premiums.


4. Ensure you have all necessary information

Independent contractors, almost more so than a regular employee, need to have all their paperwork organised in order to be hired under an appropriate contracting arrangement. Ensure the contractor has given you their ABN number, or other appropriate tax information as required.

There are a variety of requirements for hiring contractors in Australia and New Zealand, and there are significant pieces of legislation which govern how contractors can enter into professional relationships with prospective employees. It’s now up to the prospective hirer to ensure everything is in order before entering in to any such relationship.