The question of who is a contractor and who needs to hold insurance has always been complicated. There are specific requirements to meet tax legislation requirements in Australia but Workers Compensation has its own rules defining who are considered contractors and who needs to insure them. To make matters more complex Workers Compensation legislation is different in every state.

The emerging ‘gig economy’ has clouded the issue even further by bringing into question the current perception of who is a contractor or an employee. There have been some recent test cases with the Fair Work Ombudsman recently concluding after a two year investigation that Uber drivers are in fact contractors, but Foodora delivery drivers are employees. The decisions in both cases were based on the amount of control the employer has over when, where and how work is completed. An upcoming case by a Deliveroo rider will add to the emerging picture.

If a worker is an independent contractor, the worker needs to manage their own superannuation and tax arrangements and find suitable personal injury insurance cover.

However for the purpose of workers compensation coverage the definition of worker can include sub-contractors where they are paid for their manual labour or services.

The question businesses need to ask is – “is the employment relationship between their workforce based on a ‘contract of service’ or ‘for service’”? The former indicates an employee relationship and the latter is not.

In Western Australia the Act has both a primary and extended definition of a worker.

The primary definition covers those who are employed under a contract of service – the relationship being one of employer-employee.

The extended definition broadens the scope of who is considered as a worker under the Act to include independent contractors engaged under a contract for service where the remuneration they receive is in substance for personal manual labour or services.

Deemed Workers (Employees of a sub-contractor)

In some circumstances where a contractor’s workers are under the control and direction of a principal contractor, that principal contractor may also be liable (jointly with the contractor) for the contractor’s workers.

A workers’ compensation liability may also arise where a worker is engaged under contractual arrangements contrived so that the employer can avoid his or her liabilities under the Act; for example, by requiring the worker to incorporate (set up their own company) as a condition of getting a contract.

Important

Just because a person is described as self-employed or has an Australian Business Number does not exempt the person or entity who has engaged them from any liability for work-related injuries. The provisions of the Act apply regardless of any contract made to the contrary (section 301). In relation to contractors, this means that any private arrangement entered into in relation to compensation for workplace injury is null and void if the contractor makes a claim and is considered to be a worker under the Act.

There is no single determining factor or combination of factors, however if the answer is yes to some or all of the below statements, it is likely that an individual is employed within a contract of service and is an employee:

  • work under (the business owner’s) control
  • paid for the time they work
  • has income tax deducted by their employer
  • receive paid leave (sick, annual, long service, and so on)
  • use materials or equipment provided by the business to do their job
  • perform the duties of the position
  • have agreed to provide their personal services
  • bear no financial risk
  • work hours which are set by an agreement or an award

Whether you’re a worker or someone who pays a worker, the ATO’s independent contractor’s decision tool can help you understand what your working relationship is.

Bruce Insurance have expert consultants that can advise on Workers Compensation insurance in all states of Australia. Please contact us to discuss your workers compensation needs.