Author: Youth 2 Youth.

* Employment Contracts:
They do not have to be in writing,
verbal contracts are still considered
legal and binding.

* Employee vs Contractor: how do
you establish whether the new person
you are getting in to work on your
business should be considered an
employee or independent contractor?
There is a multi-factor test that is
applied by Department of Employment
and Workplace Relations - but you can
do it too :

Degree of control:

• Who is the ultimate authority
• Control not only over what work is done, but when it is done, how it is conducted etc
• If ultimate authority and control is with you then they should be considered an employee, if they maintain authority and control then they are an independent contractor

Mode of renumeration

• Does the payment system look like or resemble an award ( wages, taking out taxes and super ) ? If yes
• then they are an employee

Provision of equipment and resources

• Who provides the equipment to do the job
• Who maintains that equipment
• If provision and maintenance of equipment is with you then they should be considered an employee, if they have to provide and maintain the equipment then they are an independent contractor

Obligation to work

• Are they bound to work for you ( employee ), or do they have the choice to refuse work ( independent contractor )

Delegation of work or exclusivity

• Does the work have to be fulfilled by the person, or can they delegate it to someone else ? A contractor can get someone else to complete the job for them , an employee can't.

Hours of work and leave

• Can they complete the work at any time, as long as by the deadline ? Contractors have the flexibility to work whenever, employees must work set shifts or times.

Provision of holidays

• Employees get holiday provisions, contractors do not.

Income tax deductions

• Employees have income tax taken out of their wages / salary, contractors do not as they receive the whole amount and their income tax liability is up to them to work out and submit.

Workers compensation

• Employers have to provide workers compensation for each worker, contractors are responsible to have this for themselves.

Superannuation

• Employers must pay compulsory ( 9% of the employees salary) super for each employee into their specified super fund, contractors are responsible to do this for themselves.

If a contractor is getting all of their work from one principal ( employer ), then other factors would be considered to check that they should still be considered an independent contractor.

Letter of Appointment for new employees: When you present a new employee with a job, you should give them a letter of appointment / offer and it should include:

• Salary / wage / hourly rate agreed to.
• Brief description of duties to be fulfilled.
• Notification of any overtime that will be expected and at what rate it will be charged.
• The method of engagement ( ie. Part time, full time, casual, permanent etc ).
• Who is the employer and who is the employee.
• The commencement date. - Any probation ( or trial periods ) arrangements eg. 3 months probation period
• then performance appraisal
• then decision of future at the business.
• Date that the probation period begins and ends.
• Relevant awards / agreements that apply.

Assumed Employee Duties: Did you know that there are some employee duties that are implied or inherent in any employment contract ( whether stated or not ) ??

• Obedience.
• Duty to account for money received.
• Fidelity ( faithful service ): they can't do anything that would intentionally harm the business, they can't set up a competing business while being employed by you, and that they are working towards the goals of the business in their actions.
• Confidentiality: they are to keep trade secrets, client lists etc confidential.
• Skill and care in their work.

Assumed Employer Duties: However the employer has some implied duties too:

• Pay wages.
• Reimburse them for work related expenses.
• Provide a safe system of work: according to OH & S and WorkCover standards.
• Provision of work: if business is slow you still have an obligation to provide them with work / pay, even casuals who if they turn up for a shift must be paid for a minimum of 2 to 3 hours of engagement / work ( this does depend on the award/agreement - so find out about this ).
• Vicarious liability: this is injury to a third party or fellow employee.

Trial Periods: if the worker is contributing to the business during the 'trial period' then they must be paid for their time, whether you keep them on or not. If the 'trial' period is nothing more than a meet the team type affair, then they do not have to be paid for their time.

More information at: http://www.dewrsb.gov.au/

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