Is your contractor actually a worker?

Is your contractor actually a worker?

In 2013, the definition of a worker changed to align with the Australian Taxation Office (ATO) definition. This also changed employers’ requirements on who they need to cover for workers’ compensation.

Individual subcontractors may be deemed ‘workers’ even if they have their own Australian Business Number (ABN).
For example:

Pro 1 Concreting engages various workers and contractors to conduct its day to day business and operational tasks.

1. Administrative staff are paid via the payroll system and are on PAYG wages.

All PAYG workers need to be covered by an ordinary WorkCover policy as they are ‘workers’ under the ‘Act’.

2. A sole trader Bob has his own ABN and is engaged to lay concrete, clean and maintain the concrete pumps and machinery on a daily basis. Bob has agreed to provide his services at $30p/h and invoices Pro 1 Concreting at the end of each month based on the hours spent on the job.

Bob would be a worker even though he has his own ABN and provides his own invoices. He would be required to be covered by Pro 1 Concreting workers compensation insurance policy.

3. A sole trader Tommy has his own ABN to provide formwork and oversee the pouring of concrete. Tommy has a written agreement and provides an upfront quote for all work undertaken and is also responsible for defects. Furthermore, his contract with Pro 1 Concreting allows him to engage others. Tommy presently engages Bill, who is paid $20 p/h to assist him.

Tommy is a contractor according to the ATO Contractor Decision Tool. He does not have to be covered by Pro 1 Concreting’s WorkCover policy. Tommy would however be required to take out a WorkCover policy to cover Bill. If Tommy wanted to cover himself for WorkCover injuries he could take out WorkCover workplace personal injury insurance policy or alternatively take out an income protection policy.

4. Concrete World Pty Ltd provide and pour pre-mixed concrete on allocated jobs.

Concrete World Pty Ltd will not be considered a worker as anyone working under company, trust or partnership entity types are automatic exclusions from the WorkCover scheme under the Act. Only an individual (i.e. sole trader and/or PAYG employee) can be a worker under the Act.