Is your contractor an Employee!

From today there are changes to the way you determine if a contractor is an employee.

The new test: Whole of Relationship Test:

  • Constitutionally covered businesses use the whole of relationship test to determine if a worker is a contractor or an employee starting from 26 August 2024.

  • This test considers the real substance, practical reality, and true nature of the relationship between the worker and the business.

  • Factors such as control over how work is performed, financial responsibility and risk, who supplies the tools and equipment, ability to delegate or subcontract work, hours of work, and expectation of work continuing are all taken into account.

Changes from 26 August 2024:

  • Before 26 August 2024, the start of relationship test was used to determine if a worker was a contractor or an employee. This test concentrated on the terms of the contract between the business and the contractor.

  • From 26 August 2024, the whole of relationship test is used instead.

Opting Out:

  • Workers who earn more than the contractor high income threshold can opt out of using the whole of relationship test and use the start of relationship test instead.

  • The contractor high income threshold for the year starting 1 July 2024 is set at $175,000. This threshold is adjusted annually on 1 July.

What is a Constitutionally covered businesses, a Pty Ltd or Ltd company. Also, businesses covered by the national workplace relations system who are sole traders, partnerships and other unincorporated entities in NSW, SA, QLD, VIC and TAS as they have referred their powers to make workplace laws to the Commonwealth.

The changes to the way you determine if a contractor is an employee are complex. Businesses need to look at each individual contract and the circumstances of how the contract is actually performed to work out whether the relationship is one of an employee or contractor.

You should toalk to your employment lawyer or accountant if you are unsure about these changes.

For more information:

Whole of relationship test - Fair Work Ombudsman

Closing Loopholes - Fair Work Ombudsman

Independent contractors - Fair Work Ombudsman

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