More and more employers are incorrectly treating employees as contractors and asking them to obtain an Australian Business Number (ABN) so that they can reduce labor costs.

The Tax Office recently produced an article labelling this type of arrangement as “sham contracting” and advised that they were focusing on these arrangements.

Some specific cases the Tax Office has recently seen is where workers that appear to be in employment, but are being treated as contractors by their employers include apprentices, call centre staff, process workers in poultry processing plants.

Having an ABN does not automatically make a person a contractor. Employers must consider the specific conditions under which they engage their workers.

There are a number of factors employers need to consider when they are deciding if an employee is a worker or a contractor.

These factors include:

  1. The degree of control that can be exercised over the worker. If the employer has the right to direct how, when, where, and by whom the work is to be preformed, the worker is likely to be an employee.
  2. Whether the worker is paid for the time worked or the result produced. Workers being paid by the hour are more likely to be employees. Workers being paid by the result are more likely to be independent contractors.

If you are concerned regarding your own arrangements, please contact Ellingsen Partners to discuss this matter further.