Not as easy as it seems to construct appropriate workplace agreements

A recent article published on the HR Central Website, Constructing Appropriate Agreements In Your Workplace, highlighted the obligations faced by small businesses when determining whether a worker is a contractor or an employee.

Misclassifying workers as employees or contractors carries significant risks for both employers and workers. Correctly classifying workers is important to construct appropriate workplace agreements, as misclassification can lead to legal and financial implications under the Fair Work Act (2009). The actual work practices, rather than the stipulation in an agreement, determine the nature of the relationship.

Employees are typically employed on a permanent or part-time basis, and employers cover various practicalities such as superannuation, payroll tax, and leave entitlements. Contractors, on the other hand, are self-employed individuals or firms contracted to provide specific services or labour. They operate independently and submit invoices for payment.

Determining the nature of the relationship involves examining various indicators, including whether the individual operates as a separate business entity and works for themselves or as part of another business. Misclassification can lead to contraventions of industrial relations legislation and deny workers their entitlement to benefits.

Certain types of jobs, particularly those involving unskilled labour and extended engagement, increase the risk of misclassification. Sham contracting, where an employer disguises an employment relationship as an independent contractor agreement, presents further legal risks and is unlawful.

Employers should periodically review contractor relationships, seek expert advice, and use resources such as checklists to correctly categorise workers and maintain compliance with relevant laws and regulations. Support can be accessed from the SSAA HR Helpdesk, which guides employers in navigating employment relationships and ensuring legal compliance.

When hiring employees in Australia, businesses should decide on the type of employee based on their specific needs, considering the tasks required, skills and qualifications, job duration, and workload. Employers should also assess the impacts and costs of employment, including recruitment costs, wages, allowances, leave, tax, super, and workers’ compensation insurance. Providing a healthy and safe working environment and understanding tax and super obligations are essential.

By following a comprehensive Hiring Employees checklist such as the one provided by business.gov.au and considering these important factors, employers can ensure compliance with all Australian laws when hiring employees for their businesses.

Business Advantage members can utilise a great offer from HR Central of a free 1-hour consultation to help you stay on top of all of your obligations. Log in to view this offer.