Subcontractors: What EVERY business owner needs to know.

by Taylah Cooper

[Approx. 2-minute read]

Have you heard the term ‘sham contracting’? Hopefully you have and are therefore also aware of the other laws that might apply when engaging independent contractors (aka ‘subbies’).

For everyone else, this mini-article aims to shed light on THREE of the common rights and protections that contractors hold.

1. Sham Contracting

‘Sham contracting’ is when a business tells or tries to mislead a worker to believe that they are an independent contractor, when they are in fact an employee.

This is usually to avoid providing entitlements such as paid leave, minimum wage, and other benefits.

FACT: Just because a contractor has an ABN and provides invoices doesn’t necessarily make them a ‘genuine contractor’ in the eyes of the law.

2. Other protections

Aside from ‘sham contracting’ provisions, there are other laws in place to protect contractors from exploitative practices. 

Under the Independent Contractors Act 2006 contractors have the right to ask a Court to review a contract, if they believe it is ‘unfair’ or ‘harsh’.

The Court can consider many factors in their assessment, including if a contractor is being paid less than an employee doing similar work.

FACT: If a Court deems the contract to be unfair or harsh, they may order a change to the contract.

3. State-based laws

FACT: Finally, business owners should also be aware of what state-based laws might apply, as these can provide additional protections.

For example, in Western Australia, under worker’s compensation law (the WA Workers’ Compensation and Injury Management Act 1981), a business cannot ask a worker (whether they are contractor or employee) to set themselves up as a company (to allow that business to avoid liability for worker’s compensation).

Our FREE OFFER to help you steer clear.

It is important to be aware of these protections when engaging contractors, as breaching them can result in severe penalties to a business.

Our team is here to provide the guidance you need – contact us now and as part of our initial help, we’ll provide you a FREE and easy to use checklist of questions to ask next time you engage a subcontractor.

And if it’s all still confusing?

If you need help or have a sense this might be a future issue for you and your business, please click the link below and we’ll be happy to speak to you about any ideas this article has raised for you (or your team).

Thanks for reading!