FWO Challenges Payments to Contractors

Written by: The Institute of Certified Bookkeepers

FWO Challenges Payments to Contractors

The Fair Work Ombudsman recently instigated court action which challenged whether the worker was a Contractor or an Employee – FWO believe they are employees and the persons were underpaid.

A purchaser should ensure they are paying enough

A developing perspective being applied to all businesses is:
that when you are purchasing services, the amount you are paying to your supplier has to be at least what would allow the persons providing the service to receive a minimum wage.

Example:

A supermarket business, contracts with another business to provide people to collect trolleys, the supermarket must ensure they are paying the supplying business an amount that would cover at least minimum wage and any applicable award entitlements (including leave and overtime amounts) the trolley collecting person is entitled to receive. The supermarket cannot turn a blind eye to any underpayment of the intermediary business.

Contractors should not be paid less than employees

In the case where a transport company (Boske Road Transport) was paying individuals (who were engaged as contractors) less than they would have received had they been employees, FWO alleges that the drivers were underpaid as they were in fact employees covered by the Road Transport and Distribution Award 2010, and for one worker in relation to a period of long-distance work, the Road Transport (Long Distance Operations) Award 2010.

It is alleged three of the workers were underpaid hourly overtime rates and public holiday rates, and not paid for any annual or personal leave. The long-distance driver, who had the largest alleged underpayment, was also allegedly underpaid through failures to pay for loading and unloading duties and to meet a cents-per-kilometre entitlement.

As a general principle, this cannot be right.

Were they employees?

The Employee vs Contractor laws have 6 factors which together determine whether a person is to be treated as an employee or a contract for the different obligations: PAYG Withholding, Superannuation, Fair Work Award application.

  1. Control – who really determines how, when and where a task is to be performed
  2. Integration – are they really an integral part of the business
  3. Results – is the basis of the engagement purely payment for time or to produce a result
  4. Delegation – can the worker delegate the task to another person
  5. Terms of engagement – how was the engagement established
  6. Risk – who pays for corrections

No one test determines the relationship and not all tests are necessary for a definite conclusion as to the status of the engagement.

Not all contractor relationships are “sham-contractors”

The Boske Road Transport case

Fair Work is challenging the company on the basis that the individuals are employees.

If they are then the law definitely applies the award and minimum payment applies.

Increasingly individuals who are contracted themselves or through another entity will still have to be paid at least what they would have been paid if they were employed directly. Another application of the “Better-Off Overall” Test.

Previous Articles

If you enjoyed this article and would like to see others, then click on the link below.

Accountability BAS and Bookkeeping Services provide professional bookkeeping and BAS services to businesses in most Australian states.

What our clients say about us…

“I had the pleasure of being introduced to ABBS through Jo Bacon the WA representative. The professional service.  I have received has been so essential in assisting me with my new business, I am so grateful for the expertise, professionalism and excellent customer service I have experienced.” Marion B

“Thanks to Steve Cocks from ABBS we managed to get all the books up to date and in no time, … and that took the weight off my shoulders so I could focus on developing my business and moving forward in a more organized and structured way, keeping on top of things every month which makes life much easier.”  Elisabeth G

“As an ex-bookkeeper, I’m pretty fussy about how I like things done and I’ve found Caran from ABBS to be a pleasure to work with. She’s competent and efficient and now that I have her helping me with the bookkeeping for my business, I wouldn’t be without her.”  Sandy T

    “As a sole director of a regional law firm,  I’m very conscious of the need to have the proper business support, particularly in the areas of bookkeeping and trust accounting. Since I outsourced those components of my business to ABBS, I feel as if these vital components of my business are in expert hands and I can relax knowing that it is all being done properly , efficiently and legally.  Rob’s expertise with running a business including his insight with managing employees, his ready availability for a discussion at any time on any business matter, his advice and support, have been absolutely invaluable to CastleGate Law.  In addition, Janice from ABBS looks after my trust accounting through Leap with equal efficiency and expertise – she and Rob make a great team for any law firm.  Not only do I feel like I’m sharing the considerable burden of running a law firm, but I feel like in Rob I have someone on my side as a business owner, because of his implicit understanding of business matters, his encouragement and support. For all these reasons I cannot recommend ABBS highly enough as additions to any law firm or business partner. ”  Kate R