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Sham Contracting – Are You at Risk?

Rob Armstrong – from The Workforce Advisors Group – who are part of the lecturing team for my current Business Booster series – has kindly allowed me to re-print a recent update he posted on Linkedin.

Essential reading for all health business owners:

Here is Rob’s Linkedin Post on Sham Contracting:

When you think about sham contracting, you might think of shady companies deliberately and knowingly trying to disguise their employees as independent contractors.

The term might conjure up images of employers falsifying documents, misleading their ‘contractors’, and constantly trying to stay one step ahead of statutory authorities like the ATO.

The worst part is that because you don’t think this way you may feel you’re safe and that “others” are the guilty parties. Because you’re not doing any of these things you believe you’re not engaged in sham contracting, right?

Wrong.

While you might think this sort of behaviour is likely to be going on somewhere else, by far the greater part of sham contracting comes from well-meaning businesses and employers who just don’t quite understand the complicated system surrounding independent contractor engagement.

Without even realising it, they – and you – might fall into a sham contracting situation that could cost tens (or hundreds!) of thousands of dollars in fines, penalties and compensation.

In fact, recent sham contracting cases have demonstrated that even if both the employer and the worker understand their relationship to be a contract for services, the courts may still look behind this understanding to determine the true nature of the relationship.

And if the court sees enough to suggest that the independent contractor is actually an employee, the company will be liable for any employment benefits the worker did not receive during the course of the engagement – irrespective of whether the ‘deemed employee’ received other benefits from being classified as a contractor.

Claiming that you meant well or that you didn’t know is not enough: you need to make sure that your contractors are correctly and compliantly engaged to avoid being caught up in sham contracting.

This means considering factors such as the control exercised by the contractors over their work; the amount of time they put in; the method of payment; the type of work… even the uniforms and vehicles used by the contractors can be relevant to this determination.

As you can see – the area of Contractor V”s Employee is a very grey area and it creates some real risks for health business owners.

If you have not already registered for this weeks Sydney and Melbourne events – then go to the link below now and secure your seat.

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