Ensure your business has the right type of insurance and identify which employees can benefit from your business’s workers’ compensation insurance.
As an employer, you have a responsibility to protect your business and your employees. You must report the wages of all relevant employees according to the legal definition of “employee.” Note that you must retain records of any payments made to a “contractor” that do not count towards considering the contractor as an employee.
To understand your legal obligations, use the following definitions and guidelines:
Individuals Who “May Be Considered” Employees Include:
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- Outsourced workers
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- Salespeople, promoters, and collectors
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- Contractors under labor hire service arrangements
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- Rural workers
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- Boxers, wrestlers, referees, and entertainers
For a detailed list, refer to Schedule 1 of the Workplace Injury Management and Workers Compensation Act 1998.
How to Distinguish Between Employees and Contractors？
Unless they are employees, you are not required to provide workers’ compensation insurance for contractors.
Contractors generally have the following characteristics:
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- Hired to complete a specific task using their own skills and judgment
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- Employ others, delegate, or subcontract work to others
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- Paid according to job quotes
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- Provide their own tools and materials
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- Operate an independent business under their own name or a company name
Remember: An ABN (Australian Business Number) is not the sole factor determining whether a person is an employee or a contractor.
General employees typically have the following characteristics:
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- Directed by the employer on what work to perform and how and when to complete it
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- Required to perform the work themselves
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- Paid based on time worked
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- Tools and materials are provided by the employer
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- Work exclusively for one employer
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- Subject to PAYG (Pay As You Go) tax arrangements
Note: Someone may be hired or considered a contractor for tax purposes but still be an employee in terms of workers’ compensation insurance. A person’s tax status does not directly correlate with their status in workers’ compensation insurance.
SIRA’s Employee or Contractor Tool The State Insurance Regulatory Authority (SIRA) provides a tool to help you determine whether someone is an employee, deemed an employee, or a contractor for workers’ compensation insurance purposes. You must retain records supporting any payments made to a “contractor” that do not count towards considering the contractor as an employee.
Volunteers Volunteers and unpaid work experience students are not considered employees, so you are not required to purchase workers’ compensation insurance for them. However, you are still responsible for ensuring that volunteers and work experience students work in a safe environment.
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Author Profile: Jeffrey Liu, JP, is the founder and principal adviser of Hippo Wealth, with a deep expertise in wealth protection. His extensive experience includes roles in the wealth management divisions of Westpac, ANZ, and a local multi-family office. As the host of “Riches Talk,” a podcast dedicated to cultivating personal and business growth, Jeffrey has established himself as a thought leader in developing life riches. His insights have been featured on SBS, The Australian, and Channel 7. Notably, he was a semi-finalist on Australia’s Got Talent in 2010. Learn more at http://www.hippowealth.com.au.
