Employee or Contractor? There is a difference

I can understand that during difficult economic times, business owners search for ways to reduce their costs and outgoings but when those decisions detrimentally affect others, that’s when I get cranky.

Recently I had a phone call from a client who had been retrenched six months ago. Although this man is very skilled and talented, he has been struggling to find full-time work in his chosen profession. He and his wife had savings put aside for such a time but living on one wage for six months was not only testing the savings balance but also their relationship. So, he decided to try a different career role.

Before Glenn* had been retrenched he had worked his way up in the construction industry to a senior managerial position. He had started driving trucks 25 years ago and preferred driving them to driving a desk, so the thought of returning to it wasn’t entirely unappealing. Glenn decided to apply for a truck license and was successful. That was the easy part. Not wanting to drive long-haul, he applied for a job driving buses on city and school runs, with the occasional tourist charter. The pay rate was not mentioned in the job advertisement; however he knew what the basic wage was for this type of work and figured it would help to cover some living costs.

He attended the interview, and all was going well until the HR Manager asked Glenn if he had an ABN. He was a bit surprised and responded that he didn’t personally, although his wife ran a bookkeeping business and she had one. When he asked why an ABN was needed, Glenn was told that the job would be on a contract basis. The surprise transformed into shock when he was then told that the pay was $27.50 per hour and as he would be engaged as a contractor the bus company would not be paying his superannuation guarantee. Glenn would be responsible for his super and paying his tax.

Having worked at managerial level, and with his wife’s experience guiding him, Glenn decided to ask a couple of his own questions. Firstly, could he work his own hours? Or would he have to follow the bus company’s schedules? (No, he would have to drive to their timetables.) And would he have to supply the bus? (No, of course not, the HR Manager responded with a laugh.)

Glenn decided not to ‘show his hand’ at that point, allowing the interview to continue to what seemed a very positive conclusion. The HR Manager told Glenn she was very happy with his background and skills and she offered him the job. Shaking hands, he tried to appear pleased as he left the meeting.

You can imagine the HR Manager’s surprise when Glenn, armed with the information that he had received firstly from his wife, then the ATO website and lastly confirmed by me, informed her the next day that he would like to be hired as an employee and not a contractor and stated the reasons why. The phone call was swiftly ended by the HR Manager with an “I’ll get back to you on that” promise. She broke her promise because weeks passed with no return call. Glenn figured he didn’t get the job after all.

Sadly, this was not the first time one of my clients has contacted me sharing a similar experience and asking my advice on what to do. If you or someone you know is put in this position – or is working as a contractor when they should be an employee – please visit this page on the ATO website. There is a very short decision tool here https://www.ato.gov.au/calculators-and-tools/employee-or-contractor/. Even if you do have an ABN for a company, partnership or trust, there are other tests to determine the correct working arrangement.

If you’re still not sure, give me a call. I’ll be happy to chat to you to work out how you should be engaged.

Oh, and if you’re an employer who is unsure – check with the decision tool or come and see me. If you’ve made a mistake and have employees wrongly engaged as contractors, do the right thing and fix it. Otherwise the Fair Work Ombudsman might be asking you some very difficult questions.

* Actual names have been changed for privacy reasons.

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