The legal myth that we are busting today is that in Australia your workers and you cannot choose whether or not to be an employee, you can’t choose whether someone is an employee or a contractor, the law decides. Now this is different in every country so please get proper legal advice in whichever country you’re in. I know in New Zealand a few years ago, when I was a solicitor there it was more of a choice. You could decide with the worker how you wanted to structure it and people were quite happy to be contractors and not employees.


In Australia, there is no choice. Even if the worker desperately wants to be a contractor, you have to follow what the law says. It depends on what the law says, and it depends on the relationship between you and your worker. You can pop onto the ATO’s website. They’ve got an employee, contractor calculator. That’s what they call it, employee/contractor calculator.


Now they don’t guarantee that it’s right, because employment law in Australia is a little bit complicated. But if you go through the calculator and you answer all of the questions and keep a copy, so you can prove it, then it saves you from fines and things if you get it wrong. The reason this is so important is that if you treat somebody as a contractor when in fact they should have been an employee, you have to then pay fines,back pay, superannuation, and taxes. There’s a whole bunch of things that you might then be made liable for. 


So, you don’t get to choose. Your worker doesn’t get to choose. You have to look at what the law says, there’s many things that they take into consideration such as:

  • Do they have fixed hours?
  • Could they get somebody else to do that task for them if they weren’t available?
  • Are they working on your premises?
  • Can they work at home?
  • Do they work unsupervised?
  • Do they use their own equipment?

There’s a list of twenty things that all get mixed together, like a recipe to bake a cake. If in doubt, it seems that the case law says generally, your guy is an employee. Now this is for Australia. So, if they’re located outside of Australia, they don’t fall under Australian employment laws. Now, there are ways to make sure that the person isn’t an employee, but if they genuinely are an employee and you’re trying to get out of it, for example, by making them get an ABN which is an Australian Business Number, you’re not off the hook. The mere fact they’ve got an ABN does not mean that they are not an employee. In certain circumstances, especially if you asked them to get that ABN, they still treat it as an employee and you’re still liable for all the employment benefits.


The myth is you can choose, or they can choose whether they are an employee, in Australia that’s not correct. My best advice is go and speak to an employment lawyer. Don’t speak to me, cause I’m not an employment lawyer. I just learnt this at a conference I went to and the law changes all the time with employment. So, make sure you know your rights. 


It has been an absolute blast busting legal myths to protect your small business, so that you can lead the lifestyle that you deserve and not have to pay a whole bunch of fines for getting it wrong. Cause getting it wrong in Australia, for each infraction or infringement, last time I checked was $52,000. What small business can afford that! My name is Cathryn Warburton and I am the Legal Lioness,

Categories: Blog

Cathryn Warburton, The Legal Lioness
