This is a topic that's relevant to any organisation however due to the nature of the construction industry it's one that we often see Builders get in to trouble with.
If you hire a subbie as a contractor as opposed to as an employee, you have less obligations in terms of payroll tax, superannuation, workers' compensation and annual leave.
However, if the ATO or relevant state government department deem that your subbies actually classify as employees you may be faced with some unexpected payments. And it's not just one financial year's worth either.
To avoid any costly surprises that may be unearthed in an audit, we recommend having a system in place that will help tidy the lines between what is and isn't considered an employee.
The ATO will look at the following conditions to determine if your subbie is under a legit contract arrangement.
Are they under your direction?
Is the work performed regularly – do they have set hours of work?
Does the subbie use your tools or theirs?
Who is ultimately accountable for the outcome of the project?
An independent contractor runs their own business and they are hired to do a set task or tasks based on certain terms within a contract.
There are other measures you can take to ensure clarity around this matter such as ensuring you employ a subbie that has their own proprietary limited company. This will mean they will pay their own super and have their own Workers comp (always check this is the case by asking to see a Certificate of Currency), as opposed to hiring a contractor who is a Sole Trader.
Of course, this is an issue that doesn't necessarily have a black and white answer. We recommend that if you are unsure about whether your subbies could be considered as staff that you contact your Accountant or HR Consultant for advice around this.