All businesses in Wollongong and Illawarra that engage contractors should review and reconsider their current arrangements as a matter of priority following recent changes to the Fair Work Act 2009 (Fair Work Act) and the Australian Taxation Office’s Practical Compliance Guideline.
What is changing?
The definition of employee in the Fair Work Act changes on 26 August 2024, and employers and principal contractors must be aware of these changes and what they mean for their business.
The Current Approach to Independent Contractors
If the relationship is wholly committed to in writing, the written contractual terms will determine whether a worker is considered an employee or an independent contractor.
New Statutory Definition of Employee
From 26 August 2024, the Fair Work Legislation Amendment (Closing Loopholes No.2) Act 2023 (Cth) (Closing Loopholes No. 2) will introduce a new section to the Fair Work Act.
This new section will require the parties to consider their relationship’s “real substance, practical reality, and true nature” to determine whether a worker is an employee or an independent contractor. In considering the ‘totality of the relationship,’ the parties will look at the written terms of the contract between them and how it is performed in practice.
Opting Out of the New Statutory Definition
Contractors earning more than the high-income threshold of $175,000 can opt out of the employee definition and remain contractors, irrespective of how they work.
Superannuation Entitlements
When determining whether a worker is entitled to superannuation payments under the Superannuation Guarantee (Administration) Act)(SGA), the parties will need to focus on the written contract to determine whether the worker is an employee or an independent contractor.
Some workers may be deemed employees in the SGA’s expanded meaning when a contract with another party is “wholly or principally” for their ‘labour’.
All Employers in Wollongong and Illawarra need an up-to-date contractor agreement. Without this agreement, the business will incur significant unexpected costs.
Ring John on 0407 069 507 for HR Help.
