Bulletin 49 - Hiring a contractor or an employee
Legal issues bulletin 49 - Hiring a contractor or an employee
Legal issues bulletin 49 - Hiring a contractor or an employee
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Principals, regional and State office staff frequently pay people to undertake a variety of tasks. These arrangements can be both long and short-term in nature.
This bulletin provides an overview only of the factors to be considered when deciding whether a person is an employee or a contractor.
Where more definitive advice is required about whether an individual should be treated as an employee or a contractor this should be sought from:
Advice about taxation for employees and contractors should be obtained from the Taxation unit.
Different legal liabilities and obligations apply depending on whether the person is an employee or a contractor.
No – telling the difference between contractors and employees has challenged courts for a number of years because contractors and employees have some features in common.
Each case needs to be looked at individually to determine whether the person is a contractor or an employee.
You need to decide that before the person starts working because different arrangements need to be put in place for an employee and a contractor.
The most common way of doing this is by considering the degree of control you exercise or have the right to exercise, over the way in which the work is to be performed, including the place of work and the hours of work.
For example, if you are a principal and pay someone to work as a casual in your school’s office you will generally pay them directly (rather than through an employment agency) and supply the equipment they use.
You will also usually tell them when they should come to work, what they should do while they are at work and how long they should remain at work. What they are paid will be set by an industrial award.
A combination of all of these factors indicates they are an employee rather than a contractor.
A contractor generally agrees to produce a result. They work for themselves (or a company) rather than for you.
As well as using their own tools and equipment and working for an all-inclusive price (which may include labour), other factors that tend to indicate a person is a contractor include:
If the person you are paying can be found in a listing of the yellow pages, he or she will almost certainly be a contractor.
An example of a contractor is a person who you pay to fix an electrical problem at a campus or school.
If the person is a contractor, he or she is responsible for a range of issues that are ordinarily the responsibility of an employer.
These include workers compensation insurance and payment of personal income tax.
Depending on the nature of the arrangement, the contractor may also be fully responsible for any damage caused to third parties or their property.
Yes, provided the contractor is an individual rather than a company and he or she is engaged under a contract that is wholly or principally for his or her labour.
If the service is provided through an employment agency or the individual operates through a company the agency or company must provide the superannuation guarantee support.
In the school context, the requirement to pay superannuation deductions generally applies to music tutors, physical education instructors and band leaders that are hired by the school.
This cost needs to be factored into the total cost of the contract.
Penalties can apply if you do not make payments for the superannuation guarantee contribution. Further information on this issue can be obtained from the Taxation unit.
The Workplace Injury Management and Workers Compensation Act 1998 provides a wider definition of employee than that which normally applies.
If the particular contractor does not themselves contract or employ other people and does not generally hold him or herself out as doing the particular type of work, then the department will be responsible for any relevant workers compensation coverage.
This does not apply if the actual contract is with a company, even though the company may essentially be a “shell” for the person concerned.
It doesn’t matter what the arrangement is called. The true nature of the relationship will be based on the particular circumstances of each case, relying on an examination of the various indicators outlined in this bulletin.
This will be the case even if you have a written agreement which states that the person being paid is a contractor. The written agreement will just be another factor to consider in determining the true nature of the relationship.
A number of potential legal and financial issues can arise, including responsibility for:
In addition, you may also expose the department to an unfair dismissal claim by the person in the event the arrangement is terminated.
A good place to start is by thinking about the work you need to get done and the best way of getting it done.
The less independence you give to the person you are paying the more likely it will be that person will be regarded as an employee.
It’s important to sort this out before you start paying the person as you may be responsible for superannuation, workers compensation, taxation and other matters.
The table at the end of this bulletin gives you some examples of how to tell the difference between an employee and a contractor.
It’s important to realise this table is a guide only and that you should always ask for help if you are uncertain whether or not a person is an employee or a contractor.
You should seek advice if you have any doubts from the Industrial Relations directorate or Legal Services.
It’s useful to have something in writing before the person starts.
For an employee, this could be a letter that sets out information about the work they will be doing (for example that they are working as a School Learning Support Officer, what they will be paid and how long they will be employed).
For a contractor, it could be a contract or a quotation that you have accepted.
More guidance can be found on the Legal Services portal .
The following table is a general guide as to the most likely categorisation of a variety of relationships to be found in schools and the department generally.
It is a general guide only. There is no absolute guarantee in any particular case, a relationship described as a contractor or employee will ultimately, at law, be found to be one or the other. If any doubt arises as to the true nature of the relationship, advice should be sought from the department’s Industrial Relations directorate or Legal Services.
|Type of Work||Need identified by School?||Paid By School||Subject to Principal s professional supervision?||Working agreed Hours||Paid for Results rather than hours worked?||Provides all or most of the necessary materials and equipment to complete the work||Free to accept or refuse work||Most Likely Category|
|Music Tutor, Language Tutor, Band Leader||Yes||Yes||Yes||Yes||No||No||No||Employee|
|Dance Teacher||No||No||No||Yes||No||No but pays for use of equipment||Yes||Contractor|
|Electrician or Plumber||Yes||Yes||No||Yes||Yes||Yes||Yes||Contractor|
|Jumping Castle Proprietor (during a fete)||Yes||Yes||No||Yes||No||Yes||Yes||Contractor|
Delete from the Suggested Table heading if you don't want to convert to this. If you do want to use this sample check it is accurate and delete the previous table and this heading and instruction text.
|Type of work /
|Dance Teacher||Electrician or
|Jumping Castle Proprietor (during a fete)|
|Need Identified by school?||Yes||No||Yes||Yes|
|Paid by school||Yes||No||Yes||Yes|
|Subject to Principal's professional supervision||Yes||No||No||No|
|Working agreed hours||Yes||Yes||Yes||Yes|
|Paid for Results rather than hours worked||No||No||Yes||No|
|Provides all or most of the necessary materials and equipment to complete the work||No||No but pays for use of equipment||Yes||Yes|
|Free to accept or refuse work||No||Yes||Yes||Yes|
|Most likely category||Employee||Contractor||Contractor||Contractor|