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Clients intentionally or recklessly misrepresenting employment relationships as independent contracts will soon find it harder to hide as the government looks to establish a new sham contracting unit.
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Sham contracting set for $9.2m crackdown
04 April 2019
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Announced in the federal budget, the government will provide $9.2 million over four years from 2019–20 to establish a dedicated sham contracting unit within the Fair Work Ombudsman to address sham contracting behaviour.
Such behaviour is described as employers who “knowingly or recklessly misrepresent employment relationships as independent contracts to avoid statutory obligations and employment entitlements”.
Employers can expect increased education campaigns, compliance and enforcement activities, and additional resources dedicated to the sham contracting unit to investigate and litigate cases.
Speaking to The Bookkeeper, Institute of Certified Bookkeepers executive chair Matthew Addison said that, while he supported the initiative, more details on the scope of the unit’s work would be needed.
“The budget enables the Fair Work Ombudsman to prosecute businesses who deliberately force the arrangement to be a contract so that the payment to the supplier is less than what is reasonable and legal compared to if that same supplier was an employee,” Mr Addison said.
“Bookkeepers should ensure that any contractors are being paid amounts that enable a fair payment to the persons doing the work including an equivalent rate to cover super and leave entitlements.”
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Mr Addison said that, while any measure to address contracts that do not enable payment of legal entitlements was welcome, the crackdown reopens discussions over legitimate contract arrangements.
“It should be a positive feature of a positive growing economy, such as ours, to enable two businesses to enter a contract arrangement instead of an employee arrangement,” Mr Addison said.
“There is a long-standing issue with the definition and eligibility of legitimate, valid, commercial contract arrangements. The tax system, the superannuation system, contract law all support both sets of arrangements.
“Court precedent supports six aspects to the employee/contractor relationships. These matters must be supported in any government action about contract relationships.”
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