Independent contractor changes
On 26 August, under the recent Closing Loopholes legislation, significant changes to the classification of Independent Contractors were introduced. An independent contractor is someone who provides services for another business or person instead of being employed by them; will usually negotiate their own fees and working arrangements; and can work for more than one client at a time.
These key changes aim to offer greater protections for workers who are misclassified as independent contractors rather than employees. Let’s look at these changes.
Revised definition of employment
A new definition of employment has been added to the Fair Work Act to help determine the meaning of “employee” and “employer” which is used by some businesses to work out whether a worker is an independent contractor or an employee. To work out if someone is a contractor or an employee, the following must be considered:
- the real substance, practical reality and true nature of the working relationship
- all parts of the working relationship between the parties. This includes the terms of the contract and how the contract is performed in practice.
By applying this new definition it may mean:
- some working relationships are characterised differently
- different rights and obligations for people affected
Changes to contractor tests
There is now a different method of checking whether a worker is a contractor or an employee, using the new definition that has been applied since 26 August 2024 called the whole of relationship test. There are several factors to consider when applying this test such as:
- the amount of control over how work is performed
- financial responsibility and risk
- who supplies the tools and equipment
- ability to delegate or subcontract work
- hours of work
- expectation of work continuing
Determining whether someone is a contractor, or an employee can be complicated. If you are not clear on this, you may wish to seek some legal guidance. We would be happy to refer you to our corporate partners, Hillhouse Legal Partners who would be happy to assist you. As an AMA Queensland member, you will receive your first 20-minute zoom consultation free of charge. Please contact us on 07 3872 2264 or email workplacerelations@amaq.com.au to discuss.