afg sham contracting webinar 21.04.11
Post on 01-Jul-2015
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Understanding “Sham Contracting”
and how to protect your business
AFG Webinar 21-04-11Richard Breden
Partner FCB Workplace Law
FACTSFWO v Centennial Financial Services
• Centennial Financial Services re-engaged employees, who sold and distributed the company’s financial products, as independent contractors on a commission only remuneration package.
• There were no changes in duties performed and no change in the reporting structure or hours they were expected to work.
• They were not paid entitlements such as annual leave or superannuation and were required to submit invoices for payment.
DECISION
• By purporting to re-engage ‘Corporate Associates’ as independent contractors Centennial had breached the Workplace Relations Act s901 prohibition against sham contracting.
• HR Manager and Directors were held to be personally liable under s728 Workplace Relations Act.
• It was irrelevant that the HR Manager was essentially a ‘typist’ and was unaware of the unlawfulness of the new arrangements.
[The WR Act Provisions are similar to those under s357, 358, 359 Fair Work Act]
Contractor or Employee?• ‘Corporate Associates’ held to be employees on the basis that
Centennial:
– Gave them work, retained ownership of any clients they introduced;
– Required they attend the office daily between specified hours;
– Supervised their finances; and
– Required exclusivity.
• Other indicia: Centennial provided Corporate Associates with mobile phones, office facilities and business cards, and the Corporate Associates represented themselves as emanations of the Centennial group of companies.
Centennial Financial Services
Independent Contractor
Employee
Indicator
Hours of work
Degree of Control
Expectation of Work
Risk
Employee
Generally works standard or set hours
Performs work under the direction and control of their employer on an ongoing basis
Has an ongoing expectation of work
Bears no financial risk
Independent Contractor
Decides what hours to work to complete specific task
High level of control in how work is done
Usually engage for specific task
Bears the risk for making profit/loss on each task.
Indicator
Superannuation
Tools and Equipment
Tax
Method of Payment
Leave
Employee
Entitled to have super contributions paid
Provided by the employer, or tool allowance provided.
Income tax deducted by employer
Paid regularly, e.g. fortnightly, monthly
Entitled to receive paid leave or loading in lieu of leave (casuals)
Independent Contractor
Pays their own super
Use their own tools and equipment
Pays their own GST and tax (NB: 80% Rule)
Has ABN and submits an invoice when work is completed
No entitlement to paid leave
Shifting Obligations
Employment
BUSINESS CO
Ms. Worker
• OHS Obligations
• Extras if incorporated
• Pay Worker
• Unfair Contracts Exposure
• Be directed by Business Co
• Industrial Entitlements • Workers Compensation• Superannuation
• Unfair Dismissal Exposure
Direct Independent ContractingDirect Employment
• Liability for work
• Tax Administration
• Perform Work for Business Co• Contract Obligations
• Contract Obligations• Contract Obligations
• Pay Worker
FWA Sham Contracting Provisions
S357 - Misrepresenting employment as independent
contracting arrangement
S358 - Dismissing to engage as independent contractor:
• Is the employee doing the same or substantially the same work?
S359 - Misrepresentation to engage as independent contractor:
Making a false statement to induce employer to work under an
independent contracting arrangement.
• WORKERS COMPENSATION
• SUPERANNUATION
• PAYROLL TAX
• SHAM CONTRACTING - $33,000 per contraventionPENALTIES
• PAYROLL TAX
• SUPERANNUATIONUNANTICIPATEDLIABILITY
• SHAM CONTRACTING FW PROVISIONS
PERSONAL LIABILITY
RISKS
• Unanticipated liability
• Exposure to employee remedies e.g. unfair dismissal
• Increased vicarious liability
• Sham Contracting Provisions
COMMON LAW
• UNFAIR CONTRACTCOMPENSATION OR UNANTICIPATED
COSTS
• WORKERS COMPENSATION
PREMIUM EXPOSURE
RISKS
Introducing enableHR - AFG• Partnered with AFG to meet
the new HR requirements under NCCP
• NCCP compliant HR system
• Helps manage contractors and employees under NCCP and the Fair Work Act 2009
• Supports legitimacy of employment or contractor relationship
• www.enablehr.com.au/afg
Business Size* Annual Fee(excl GST)
1 – 10 $495
11 - 24 $950
25 - 50 $1,950
*Includes employees and contractors
Introducing enableHR - AFGMORE INFORMATION: www.enablehr.com.au/afg
(02) 9922 5188
PURCHASE: Click on “SIGN UP” on AFG Homppage
COST AGAIN: $495 (1–10), $950 (11-25), $1,950 (26-50)
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enableHR, in conjunction with AFG, has taken the burden off our hands through the implementation of a cost efficient, time efficient, simple to use application
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Simon Orbell – Smart Move
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