Recruiters ignore complexity of contractor legislation

by HCA18 Oct 2011

Leading employment law experts have warned that recruitment agencies must invest more time into understanding the growing complexity of independent contractor legislation.

Administrative, Commercial and Employment Law barrister, Andrew Wood, has said that while many recruiters are trying to increase their knowledge on the issue, the first step is to understand the definition of an independent contractor.

“There are many work relationships that can be properly categorised as independent contract relationships. It’s important to look at the totality of the work relationship, including its dynamics, in order to determine if someone is truly an independent contractor,” Wood said.

Consultant Tax Lawyer Peter Gell added that the definition of an independent contractor can vary, depending on whether it’s for common law, superannuation guarantee or payroll tax purposes. However, there are several elements of the law that apply to all scenarios. 

“Independent contractors are normally engaged to produce a specific result, aren’t subject to day-to-day direction and control and may have their own employees they can delegate tasks to,” Gell said.

Wood said the recruitment industry needs to make sure only true independent contractors are engaged under arrangements of this nature, as incorrect classification can affect liability, workplace obligations and work entitlements.

Wood said the consequences of incorrect classification can have wide ranging and long-term effects on a business. 

Repeated misclassification of independent contractors is not looked upon favourably by the courts, because it is seen as undermining the rights that have been won by employees and independent contractors, Wood explained.

Gell added that while the legislation on independent contracting is complicated, recruitment agencies need to ensure they are operating in compliance with the regulations. 

“It’s vital recruiters are across the legislation and regulations so they can minimise issues that may arise down the track due to external auditing or complaints from contractors or clients,” Gell said.

Next week (24 Oct) an event on this topic is being hosted in Melbourne, for information click here.

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