Workers can also be engaged as independent contractors to perform cleaning work. Contractors have different tax and superannuation obligations to employees. They are required to have an Australian Business Number (ABN), pay their own tax (including goods and services tax) and superannuation. They do not have statutory leave entitlements and may have to pay for damage made in the course of their work.
Contractors operate their own independent businesses. They have the ability to complete tasks or services as agreed to in their services contract or agreement and are free to accept or refuse extra work.
Misclassification occurs when an employer engages a worker as an independent contractor who at law is an employee. Although it may not be deliberate, misclassification can result in an employer contravening the Act in regards to an employee’s minimum entitlements and other employer obligations.
Misclassification which is deliberate may also result in sham contracting. Sham contracting arrangements occur where an employer deliberately attempts to disguise an employment relationship as an independent contracting arrangement. This is usually done to avoid responsibility for employee entitlements.
Under the sham contracting provisions of the Act, an employer cannot:
- misrepresent an employment relationship or a proposed employment arrangement as an independent contracting arrangement
- dismiss or threaten to dismiss an employee for the purpose of engaging them to perform the same or substantially same work as an independent contractor
- make a knowingly false statement to persuade or influence an employee to become an independent contractor.
The Act provides significant penalties for contraventions of these provisions.