Contractors and workers guideline

How to tell if a contractor you have hired counts as a worker for the purposes of WorkCover insurance premiums.

Shape

Introduction

In most cases it will be clear whether a person is your worker and therefore covered for workers compensation purposes. However this may not be so clear for your contractors.

It is your responsibility to find out whether your contractors are considered workers by WorkSafe. If they are, this may impact your total remuneration, which is one of the key factors that influence your premium and whether you need to register for WorkCover insurance. If your total remuneration exceeds $7,500 per year, you must register for WorkCover insurance.

Each time you hire a contractor, you need to determine whether they are considered to be a 'worker' by WorkSafe. If the person is considered a worker, you effectively become their employer for WorkCover insurance purposes, and you must include the money you pay them in your total remuneration.

It is important to get this right as it is against the law if you are not registered for WorkCover insurance and paying the correct premium. You risk having to pay the amount of premium that should have been paid and penalties of up to 100% of that amount.

The purpose of these guidelines is to help you to decide if a contractor you engage may be considered your worker for WorkCover insurance purposes.

These guidelines do not apply to you if you obtained the services of an individual through a labour hire (or on-hire) firm and pay that firm for the work undertaken in your business.

In addition, these guidelines do not apply to owner drivers, door-to-door sellers, timber contractors, taxi drivers, share farmers, outworkers and sporting contestants.

Guidelines

How to apply the guidelines

If you have hired a contractor you must check whether the individual who actually does the work for you will be your worker for workers compensation purposes. You must do this regardless of the business structure that is being used by the contractor.

The term 'contractor' covers a wide variety of individuals who may operate as sole traders or through companies, partnerships or trusts.

The guidelines have 2 main steps.

If you have contracted with a sole trader to do work for you, apply step 1, then apply step 2.

If you have contracted with a company, trust or partnership for work to be done, go straight to step 2.

What is a sole trader?

A 'sole trader' does not use a company structure or have business partners.

A sole trader may have their own A.B.N. (Australian Business Number). They may operate a business under their own name or under a registered business or trading name.

The business decisions for a sole trader are generally made by one person (usually the owner). However, this does not mean that there is only one person in the business who carries out all the work and responsibilities associated with the business. Like any business, a sole trader is able to employ others.

Steps

Disclaimer

Unless otherwise specified within this guideline, this guideline is WorkSafe's interpretation of the Law as it has operated to date and continues to operate. Guidelines do not have the force of law. Each decision is made on the merits of each individual case, including by considering all relevant law and having regard to any relevant guideline. It is an employer's responsibility to ensure that they are using the current version of a guideline.

If employers using the guidelines are unsure about whether a contractor they have hired is their worker they should contact WorkSafe or their WorkSafe agent, and/or seek their own legal advice.

Related information