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Sham Contracting is when an
Independent Contractor Agreement Violates Employee Rights and Employment Law
A sham contracting arrangement occurs where an employer
attempts to disguise an employment relationship as an independent contractor
agreement, usually for the purposes of avoiding responsibility for employee
entitlements. Under the sham contracting provisions of the Workplace
Relations Act 1996, an Employer can not:
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intentionally disguise a person’s
employment, or an offer of employment, as an independent contractor
agreement;
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dismiss, or threaten to dismiss an Employee
for the sole or dominant purpose of re-engaging the person as an Independent
Contractor;
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make a knowingly false statement for
the purpose of persuading an Employee to become an Independent Contractor.
The Act provides serious penalties for breaches
of employment
law. Employees and Independent Contractors can request
assistance from the Fair Work Ombudsman
if they feel their employee rights have been breached.
Click here
for a checklist to see if you qualify as an independent contractor.
If you cannot answer 'yes' to most of the questions then you can only be engaged
as an employee. Also you can compare your situation by clicking here
and decide if you are an employee or a contractor.
Contracting to
supply security services to a business is done by taking all the costs concerned
as well as adding a profit margin. Security Contractors are
well aware of costs and conditions contained in the Security Services Award.
When making a proposal to supply security services, the hourly rate
charged for the provision of security services is approximately the same.
Some Security
businesses are engaging in sham sub-contractual arrangements to reduce or do
away with conditions such as overtime, penalty rates and leave
entitlements. Work is offered on the condition that a worker obtains an Australian Business
Number (ABN).
They are then asked to invoice the employer for work performed, thus
becoming a sub-contractor. If you are being paid under a contract
that is wholly or principally for labour, then the person or business paying you
have to make super contributions on your behalf, even if you quote an Australian
business number (ABN). Click here
for further details.
In many cases, hourly rates are very low that there appears little
margin between the amounts invoiced and what a person would receive on award wage.
Many
security sub-contractors are clearly employees. They work exclusively for
the Security Contractor, they work as directed, use no personal plant or
equipment, have settled hours, are paid regularly. The average
on-cost for a worker to a security company is 22% to 25% and the average
on-cost for a sub-contractor is under 10%.
Security Sub-contractors do not have enough coverage by
employment laws or collective agreements negotiated by a union, therefore
retain least bargaining power.
Considering
a Independent Contractor Agreement?
If you choose
to enter into a sub-contracting arrangement with a Security company, consider
the following points. Judge whether it is in your interests or
the interests of the Security company for you to enter into this
legally binding agreement as an independent contractor. This web
page is an example of the contract
that Wilson Security has with its clients. If you choose to be a
sub contractor then at least have some of these clauses in your contract to
protect you. Get legal advice before you sign any contract.
A
sub-contracting arrangement shifts responsibility from the Security
Contractor to the individual sub-contractor for:
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Payment of tax.
You are required to pay your income tax as well as Goods and Services Tax.
The purpose of an Australian Business Number (ABN) is to track the payments
of money. The Security Contractor when he pays you, submits to the Taxation Department your ABN and the amount paid.
The Taxation Department knows when you submit your tax return how much tax
you are liable to pay.
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Payment of
superannuation. If you are being paid under a contract
that is wholly or principally for labour, then the person or business paying
you have to make super contributions on your behalf, even if you quote an
Australian Business Number (ABN). Click here
for further details.
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Payment of income
protection insurance.
You need to take out separate income protection insurance to cover yourself
because you do not have any workers compensation rights.
In the security industry the chance of being injured is quite high.
Centrelink payments cannot make up for the loss of income. For
an online quotation for income protection insurance click here.
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Payment of public
liability insurance.
Making a mistake in your job which causes property damage, results in false
arrest, inflicts assault or causes death can make you legally responsible
for damages to the injured party. This is more applicable in the
Crowd Control industry. Someone sues you and the court decision
goes in their favour and you cannot pay damages to the other party, the
courts have the right to seize your property in payment. Having
Public Liability Insurance ensures that you can meet these costs if they
occur. This website is DMA
Insurance Brokers and it gives some indication of what insurance can be
obtained in the Security Industry and their application
form. For an online quotation for public liability insurance
click here.
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Workplace Health
and Safety considerations.
Security Sub-contractors work for small Security Contractors, which are
less likely to have health and safety assets, knowledge or information.
This forces you to work in areas that are unsafe or unhealthy.
In addition, the cost of safety gear (high visibility vests, safety helmets
etc) is yours because the Security Contractor has no duty to supply you with
this equipment.
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Employment Security.
Security Sub-contractors have poor coverage by employment set of laws or
union negotiated collective agreements. You
have the least bargaining power, therefore conditions of the Security Award
or Collective Agreement do not apply to you.
If you are
currently working as a Security Sub-Contractor, go to the Pay Calculator page and enter your details as if you were an employee. Because holiday pay and sick
leave are accrued, designate yourself as a 'Casual'.
This is because these entitlements are expressed as a dollar figure in
the Casual Loading. This calculator gives you the minimum
amount you would receive as an employee at this time. Allow
for pay increases over the years that your contract extends. Now
add to this the cost of income protection insurance, public
liability insurance or approximately 25% more. Make sure the Contractor is paying
your superannuation instalments. Unless you are receiving at least
25%
or more for your work than an employee then the Security Contractor has your
money in his pocket. If you know of Security businesses
engaging in Sham contracting arrangements then expose them with a post to the Security
Guard Forum.
Click here
for the Security Services Award Pay Calculator and cancel the password
Visit the
website of the Fair Work
Australia to determine if you are working under Sham Contracting
arrangements or to define what is a contractor.
See Article:
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