I was disappointed to read the Victorian Labour Hire Authority’s newly published Guide to Engaging Workers as Independent Contractors.
You can read a copy of the Guide here. But I’m not sure I’d bother.
Remote road with sign post directing traveller into a clump of cactus.
The Guide, though referencing the FWO’s and ATO’s more extensive material, selectively lists only six of the ten key characterisation factors identified by the FWO as necessary to distinguish employment from independent contracting. Significantly, the Guide makes no mention whatsoever of the importance of the intention of the parties.
It fails to mention the fact that the very tests that it does indicate, together with the multi-factorial approach, are presently the subject of two appeals which have been heard by the High Court and are awaiting judgment.
It fails to mention that the Full Bench of the FWC, cognisant of those two appeals and of the approach adopted by the High Court in Rossato, considered that the traditional approach to characterising independent contracting relationships is now clouded by such uncertainty that it put the important case of Deliveroo Australia Pty Ltd v Diego Franco on hold until the High Court decisions are handed down.
It’s worth noting what the Full Bench had to say about that:
[5] We have decided that the appropriate course is to defer the determination of this appeal until the High Court has heard and determined the appeals in Jamsek and Personnel Contracting. This appeal is a matter of some importance, given that it is likely to have significance for the whole of Deliveroo’s workforce and perhaps also for the “gig” sector of the economy more broadly. We agree with Deliveroo that the decision in Rossato (particularly at [101]) has, intentionally or otherwise, called into question what principles are to be applied in determining whether a relationship is one of employment or independent contracting and the status of Hollis v Vabu in that respect. In all likelihood, the High Court’s decisions in Jamsek and Personnel Contracting will provide authoritative guidance as to these issues.
Nevertheless, the Victorian Labour Hire Authority, confident of the authority of its own view, presses ahead with what it claims is a guide to ensure that, when engaging workers as independent contractors, you:
- comply with your legal obligations
- do not engage in sham contracting
- keep your labour hire licence.
You can make your own mind up about how much guidance it provides… and in what direction it is steering you.
The best that can be said about it is that it errs on the side of caution.
But it errs, nonetheless.
Andrew C. Wood
Recruiters' Casebook 
Hi Andrew,
I was surprised to read this:
Labour hire providers must withhold tax from payments to individual workers who perform work or services directly for clients (including hosts), regardless of whether they are an employee or independent contractor. All workers (employees and independent contractors) need to provide you with: • their Tax File Number (TFN), regardless of whether they also have an Australian Business Number (ABN) (which they may have for unrelated activities), or • an instalment rate to vary the rate of tax.
I appreciate that PTY contracting is considered grey in some cases but I am not aware of any agencies that deduct PAYG tax from PTY LTD contractors.
Or is this more in relation to sole traders as opposed to PTY LTD arrangements?
kind regards
Ryan Kevelighan
+61 4222 36968
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Hi Ryan
Thanks for the observation!
I think the ATO’s material is perhaps more comprehensive and reliable on this topic, where a distinction is being made between indepedent contractors contracting as individuals and independent contractors contracting through an interposed corporate entity.
Have a look at this guidance provided by the ATO and see if it helps to clarify the situation.
https://www.ato.gov.au/business/payg-withholding/payments-you-need-to-withhold-from/labour-hire-firms-and-their-workers/
If it doesn’t, you might need to get some advice from a tax professional.
One thing I have observed, however, is that, even where a Pty Ltd entity is interposed, it is not always the entity that provides the services. Sometimes the entity is nothing more than a payroll service provider for the individual worker.
For example, the RACGP makes an important distinction between:
– incorporated medical practices – which provide medical services, operate as a medical practice, earn income from patients and pay the business expenses. The remaining profit is distributed to the doctor/s or owners; and
– Service entities/companies & trusts – which provide non-medical services to support the provision of medical services by doctors to patients.
See: https://www.racgp.org.au/FSDEDEV/media/documents/Running%20a%20practice/Practice%20resources/Management%20toolkit/Business-structures.pdf see pages 2-3
In either case, you could say the doctors were “working on ACNs”; but only the incorporated medical practice is actually interposed to provide the medical services.
That is why it is always important for agencies to know what role the interposed entity actually plays.
Kind regards
Andrew
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