Purpose
Our company regularly engages individuals and entities (such as companies) to provide a range of services on a temporary basis. In some circumstances, it may not be clear whether the arrangement should be one of employer/employee or whether the person(s) or entity should be engaged as an independent contractor(s). The distinction between employees and independent contractors is important in determining our company’s obligations under a range of legislation relating to income tax, payroll tax, workers’ compensation insurance and superannuation. The Australian Taxation Office and the respective Offices of State Revenue place the responsibility on our company to correctly process payments to ‘employees’ and ‘contractors’ and to remit the correct amount of Pay As You Go (“PAYG”) withholding tax and payroll tax, as well as meeting superannuation, fringe benefits tax (“FBT”) and worker compensation obligations.
Scope
This Policy applies to all individuals engaged or appointed by our company to perform a range of services. This Policy does not apply to engagements entered into with service or labour hire organisations.
Policy Statement
This Policy outlines the principles for determining the nature of engagements with individuals and entities (such as companies and trusts), and the specific obligations placed upon our company as a result of that engagement. The policy has been developed to ensure the company meets its legal obligations and limits its exposure to penalties for misrepresentation, breach or non-compliance. Our company is committed to meeting its obligations in respect of:
a. Pay As You Go (PAYG) withholding tax;
b. payroll tax;
c. workers compensation;
d. Superannuation Guarantee Contributions (SGC)
e. fringe benefits tax
f. Independent Contractors Act 2006 (Cth)
g. Australian Taxation Office Taxation Ruling
Wherever possible the company will engage individuals as employees to ensure they are adequately covered for insurance and workers compensation purposes.
Policy Principles
Our company must ensure that the actions and decisions of individual organisational units do not breach its obligations under the relevant Federal and State legislation.
The characterisation of an employee or an independent contractor must be clearly determined before any engagement undertaking is given. The determination of employee or contractor status will be made by the delegated officer authorised to approve staff appointments in accordance with our company’s Delegations of Authority Policy and Register.
Subject to the Guidelines and the Checklist, our company will treat persons performing standard and accepted occupational functions, similar to those performed by existing company employees as employees for the purpose of income tax, Superannuation Guarantee Charge (SGC), FBT, payroll tax and workers compensation.
The onus is on any individual or entity who considers that they are exempt from a particular categorisation made by our company to present evidence of their exemption from the requirements in relation to PAYG withholding and SGC contributions to the organisation’s satisfaction.
Documentation
- Induction Guide
- Code of Conduct
- Contractor Agreement
- Enterprise Agreement
Definitions
Checklist means the Employee or Contractor Checklist that accompanies this Policy.
Contract of Employment means a contract under which a person (the employee) is employed in return for some benefit or remuneration from the employer. As a general rule, if the contract gives the employer a right of control over the employee’s manner of doing the work, it is an employment contract, rather than a contract for services.
Contract of Service means a contract under which a person is engaged in the service of an employer to do such work as is contracted for and where the employer directs what is to be done. This is also known as a “Contract of Employment”.
A contract for Services means a contractual arrangement by which one person or entity agrees to provide workplace services to another. The contract is between two principals (which can either be a person or entity) and neither is the employer of the other. The person or entity providing the services is an independent contractor. This is also known as a “contract by performance”.
Deemed Employee means a person who the company contracts wholly or principally for the supply of their labour and who is unable to delegate responsibility to another person for the completion of the contract. Labour includes intellectual and artistic effort as well as physical effort. “Guidelines” means the Determining Employee/Contractor Status Guidelines that accompany this Policy.
Independent Contractor means a person or entity who contracts to perform work for another person or organisation but is not employed by that person or organisation. An independent contractor undertakes to produce a given result and the agreed payment becoming payable when the contractual conditions have been fulfilled. In principle, an independent contractor may decide how to perform a task, although, in practice, the extent of control exercised by the party for whom work is being done may be substantial. An Australian Business Number (ABN) is not sufficient to determine independent contractor status. An independent contractor may also be referred to as a “Consultant”.