On 26 August 2024, constitutionally covered businesses used the whole-of-relationship test to determine whether a worker was a contractor or an employee.
Businesses and persons (and the workers they engage) need to use a test to determine if a worker is a contractor or an employee.
From 26 August 2024, a corporate employer will use the whole relationship test to determine whether someone is a contractor or an employee.
Start of relationship test
This test is now only used by constitutionally covered businesses when determining whether a worker is a contractor or an employee for work performed before 26 August 2024 or if the worker opted out of the whole relationship test.
How the test works
The whole relationship test determines whether a worker is a contractor or an employee by considering the relationship’s real substance, practical reality, and true nature by considering:
- the actual substance, practical reality and true nature of the relationship
- all parts of the relationship between the parties, including the terms of the contract and how the contract is performed in practice.
- 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.
Consider the following when deciding who is a contractor or employee,
- whether someone is a contractor or an employee will depend on their specific circumstances
- all of these factors should be considered
- there usually won’t be one deciding factor. For example, a worker who has an ABN or issues invoices isn’t automatically a contractor.
- a worker won’t automatically be a contractor or an employee because of the type of work they do. They may perform the same work as business employees but may still be contractors.
Engaging new contractors in your business in 2025, get the right contracting agreement in place before starting new contractors.
Even though you engage a contractor through a corporation, this may not be enough to protect the business from claims for overtime, loading under modern awards as well as unfair dismissal claims and annual and personal leave.
Call John for help on 0407 069 507.
