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Many Strata Managers are entering into contracting arrangements that not only put their company at risk but also themselves and their clients. Is your arrangement with the contractor actually an employment contract in disguise? Many sole traders do not have the correct insurances and could be considered an extended worker under section 175 of the Workers Compensation and Injury Act. This leaves the building owners liable for any claims relating to the undertakings of the contractor on their property. In addition, there is also the question of when a contractor is a contractor and when they are an employee. Consider the scenario below and think whether or not you or colleague may have encountered this or are currently in a similar arrangement.
“Jane Smith of Smith Strata Company hires David Doright to clean and maintain the common areas of one of her properties. David is a friend of one of the owners and has offered to do the work for a low rate. Jane provides all cleaning chemicals and equipment that David will require, replaces them when needed and also dictates when the work is to be carried out. David invoices Jane for his work each month which is paid to him as per standard credit terms.”
So since David has an ABN and is invoicing Jane for his work, this makes him a contractor right? Wrong. By definition of the Fair Work Ombudsman, David is actually an employee and therefore Jane should be paying leave entitlements, superannuation payments, insurances (workers comp and public liability) for David and all other legal entitlements of an employee. Sadly, this scenario is not only common but can lead to expensive pay outs running into the hundreds of thousands. The Fair Work Ombudsman is currently auditing companies engaged in contracting arrangements and it is highly likely that many unsuspecting companies will be caught in their blitz on this controversial issue.
So take a moment to consider your current contracting arrangements. There are many aspects that will effect whether or not you are actually contracting out these services or simply employing someone to provide them. Don’t get caught unawares because it may not only be expensive, it may also damage the good name and standing of your company.