To avoid legal ramifications, employers should
clearly define whether they are entering into an employment
relationship or an independent contractor relationship with an
individual.
Theoretically, the distinction between an employee and a
contractor is simple - employees work in your business and are part
of your business, contractors run their own business and provide
services to your business.
In practice, however determining whether an employed person is
an employee or a contractor is a far more complex issue. The
consequences of getting it wrong are considerable for an employer
and its directors.
'Sham contracting', where an employer claims there is an
existing independent contractor arrangement with an employee when,
legally, there is an employment arrangement in place, is an offence
under the Fair Work Act 2009 (Cth).
