The following factors need to be considered when classifying your staff:
- The degree of control over the worker
- The mode of remuneration (i.e. hourly/daily rate vs being paid for an outcome
- The ability of the worker to delegate
- Who supplies the tools/equipment
- Who bears the risk
These factors should be outlined in your employment contracts. Employment contracts provide the opportunity for you as an employer to carefully negotiate and draft terms and conditions. Why is it important to correctly classify workers?
- Superannuation – The ATO is targeting superannuation, and substantial penalties apply to employers who under-pay workers
- Payroll tax
- Leave entitlements
Take home message
While classifying workers can be difficult, ensuring that you’ve done your research is vital. It is incredibly important to seek advice if you are unsure, as the financial impacts can be huge. Reduce the risk of future issues by drafting contracts that are clear and thorough.
