Freelance Global, a specialist in independent contractor engagements offers top tips for individuals and businesses on working with this segment.
1. Understanding the difference between an IC and an employee
One of the major characteristics distinguishing the two classifications is that an employee usually has an ongoing expectation of work, whereas an independent contractor is usually engaged for a specific task.
2. Understanding the consequence of getting it wrong
In the event of breach of law, the business can be penalised for noncompliance; the employer will be responsible for PAYG liabilities, underpayment of wages, breach of awards, leave accruals, Super, Payroll Tax and WC penalties; the individual will have tax implications; the business will face disputes from lack of contract; and there will be WH & S issues.
3. Making sure you have a well-planned/ documented contract
Avoid oral agreements even for a short term contract. The contract should cover relationship, responsibilities, outcomes (results) expected, liability, dispute resolution, intellectual property rights, termination terms and payment terms. Be aware of unfair contracts (Independent Contractors Act 2006/ Sham Contracting FWA 2009).
4. Occupational health and safety
It is important to understand WHS obligations as a self-employed person. This segment is also not generally covered by WC, requiring them to organise their own accident protection insurance.
5. Business insurance
Generally ICs bear commercial risk for losses suffered from any work performed. Ensure cover is for right amount and the length of any contract.
6. Superannuation Guarantee Contributions
An IC is generally not entitled to receive SGC; however, there are specific rules in relation to Super. ICs should consider making voluntary contributions or seek advice from a financial planner to secure a retirement plan. ICs should factor this cost into the rate of services provided.
7. Choosing the right business structure based on personal requirements
One should evaluate the benefits of each structure; understand tax obligations for each structure; and also understand and comply with tax provisions (PSI).
8. Training/ upskilling
It is the responsibility of the IC to make sure skills are kept up-to-date. There are certain tax deductions available for training.
Licences, permits, registrations and certificates may be required for specific industries. It is important the IC has the required documentation and hirers of their services should obtain copies of documentation. This information should also be captured in the contract.
10. Advertising services to the public at large
Advertising the IC’s services to the public is considered important when determining a contractor relationship. The IC will need a large marketing budget to advertise their services.