It may be worth considering, depending on the particular circumstances of your business. But unfortunately, it’s not quite as simple as just “putting them all on contracts.” Whether your workers sign a contract of service or not, they will only qualify as independent contractors if they meet the criteria that qualify them as such.
Certainly, it’s not uncommon for some business owners to perceive positive advantages in retaining independent contractors rather than employing staff as such, thereby side-stepping the various employee benefits and other obligations legislated under the Fair Work Act. And in many cases, that will be a perfectly sensible and legitimate alternative for them. Engaging contractors to service particular facets of your workload, as opposed to hiring staff to do the job, can provide significant advantages by way of efficiency, cost-effectiveness and administrative ease. Independent contractors impose no demand on a business to any legislated leave entitlements, penalty costs or long service benefits. They are, for the most part, responsible for their own tax and superannuation payments, and generally they raise fewer and less-problematic termination issues. Additionally, particularly in enterprises where work-flow is project-driven, and therefore less consistent and predictable, contract labour can provide more certain and efficient management of output.
But be careful, because simply signing a carefully-worded contract doesn’t necessarily make someone an independent contractor for the purposes of the Fair Work Act, or the ATO. As a business owner, you are responsible for classifying your workers for tax and super purposes, and you’re expected to get it all exactly right. Indeed, if you don’t, you could face some hefty penalties.
So how do you work out whether your worker is an employee or an independent contractor? Courts are not uncommonly called upon to adjudicate on service contracts which have been negotiated by employers purporting to create a contractor relationship, but which in reality fulfil many if not all the characteristics of an employer/employee arrangement. To determine the issue they take a comprehensive look at the essential activities of the business, and compare them with the role discharged by the worker in the business. A wide range of factors may come under scrutiny, including but not limited to the level of control the employer has over the work, the ability of the worker to take work with other businesses, the ability of the worker to delegate or subcontract, and who provides the tools, resources and equipment to get the job done.
Ultimately, the central question is whether the worker can be truly said to serve in the business, or are they simply providing services to the business. If the former, they’re an employee, if the latter, they’re a contractor.
Of course, the answer may not always be a simple and straightforward one. But one thing is for certain – it will be determined entirely by the worker’s role within the business, not simply by any agreement signed for their boss. No one is an independent contractor just because some signed agreement says they are.
Published in Ocean Road Magazine 9 October 2025: Ocean Road Magazine
