You may be in a situation where you use a contractor for some of your business’s functions. There are many benefits to utilising contractors, but it is difficult to know how long they can keep working for you. If you are not careful, they may gain employee entitlements by being considered employees. Read on to find out the information you need to navigate this issue.
What Is a Contractor?
Contractors are individuals that run their own business and will sell their services to other parties. Contractors are assigned by businesses to perform specific tasks through a contractor agreement. They have the autonomy to complete the task as they see fit and will invoice for their services. Furthermore, contractors have the freedom to choose when they work and if they accept a work agreement or not. Moreover, contractors are responsible for their own super and not eligible for leave or other employee entitlements.
Can I Keep Using the Same Contractor?
Basically, the same contractor is allowed to keep being engaged by your business. However, this is on the condition that they are not in reality an employee. Importantly, that means there needs to be a separate contract for each task that you want them to perform. The main issue with using the same contractor over a long period of time, is it can indicate that there is an employment relationship. In addition to the fact that you will have to pay employee entitlements, you can face significant legal consequences. So while you are entitled to use the same contractor ‘indefinitely’, this is only the case if they are truly a contractor.
Avoid Sham Contracting
As mentioned above, you are not entitled to engage someone as a contractor if in reality they are an employee. Sham contracting is the disguising of the nature of the relationship between you and the ‘contractor’. Businesses will engage in sham contracting to avoid paying employee entitlements, and therefore minimise the costs of their business. Sham contracting does include threatening or illegitimately influencing an employee to cease employment to be rehired as a contractor.
Should I Just Hire Them as an Employee?
If you are consistently hiring the same individual or company as a contractor, it may be better to just hire them as an employee. Providing they agree to it, hiring them as an employee can prevent the issues that arise when you consistently utilise the same contractor. Furthermore, you can tie them closer to the business and internalise their strengths and capabilities.
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Conclusion
Therefore, while technically you can keep hiring the same contractor, you create the potential that an employment relationship will form. To ensure you are using your contractors appropriately, get in touch with an employment lawyer to provide you with legal advice for your circumstances.
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