You may have heard that if your employees get ABNs and call themselves contractors, then you do not have to pay their Superannuation Guarantee, Work Cover and Payroll Tax. If you think this sounds too good to be true, then you are spot on!
What is the Government’s view?
To truly be a contractor, you need to be hired to achieve a result. In achieving that result, you must have control over how you achieve this result. Furthermore, a genuine contract allows you to delegate – this means you should be able to hire your own staff.
You may be thinking that all of your employees achieve results everyday because, let’s face it, that is why you hired them in the first place. Wrong! A result, in the view of the Law, refers to a specific outcome. Generally most employees are paid per hour. Consideration in this case is based on time, therefore, you are working in the service of the employer and not to achieve a result.
A further factor, to make this definition even more complicated, is the issue of risk. As a contractor you are assumed to take on the costs arising from defective work or injury. If the employer bears the risk of rework then the contractor is likely an employee.
What does this mean for you?
This is a contentious area of Law with numerous cases being argued in the courts. Failure to meet these obligations can be met with very stiff penalties.
This is a very brief overview and it is always advisable to seek advice from your Accountant before engaging new staff.