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  • #987821
    Claud Hamilton
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    Hi all

    Background:
    I operate a two-person business providing an IT consulting service to a single client. My client (a large US corporation) has approached me with the CV of a guy that they wish to take on as a permanent member of staff, but their internal onboarding process is really slow. However, as they have an immediate need for his services, they wish for us to employee him on a contract basis to be paid hourly rate for hours worked. The idea being that he will become a permanent member of staff of the client after 2-3 months.

    In theory, I have no issue with this as I have been working with this client for 10 years (mostly through an agency, only recently directly).

    However, as we have no legal team nor past experience of taking on new staff, we don’t really know where to start or what our obligations are. The two employees of the business (myself and my partner) draw earnings for hours worked only as directed by the client. If the client has no work, we don’t get paid. We don’t pay ourselves annual leave nor sick pay. As I understand it, this is acceptable when an employee is considered “casual”.

    My questions then are these:

    1. Is it legal to include terms for no sick/annual leave in a Master Agreement for employees as long as the agreement states that the employee is “casual”?
    2. What are our legal obligations, beyond:
      • requesting TFN declaration,
      • witholding PAYG,
      • paying super at 9.25%,
      • payment of wages
      • issuing pay advices
      • where might I find a good (preferably free) Master Agreement (or template) that I can use as employment contract?

    As mentioned above, this new hire is only likely to be with us for a few months and it is unlikely that we will be seeking to take on more staff any time soon, so we need to do this as economically as possible while still ticking all the legal boxes.

    Many thanks for any advice,
    Claud

    #1164455
    Anonymous
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    Hi Claud,

    Welcome to Flying Solo :)

    I’m not an HR expert, but your story rings many alarm bells for me. Fingers crossed that one of our resident HR gurus can pop in and give you some general advice to help you navigate the next steps.

    Hope it all works out smoothly,
    Jayne

    #1164456
    vanessa@legal123
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    • Total posts: 20
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    Hi Claud

    You definitely need to understand your obligations as an ’employer’ before you take on any staff. Just calling them a contractor or ‘casual’ does not mean they are. There are many new and recent cases of businesses being forced to back pay for superannuation, holiday pay, etc and fined for trying to avoid hiring permanent staff and instead calling them contractors or casual staff.

    The short answer is yes, you are responsible for and liable to pay all employee benefits, have insurances, etc. for permanent staff whether part time or full time. To determine whether you can honestly call them a contractor (casual) where you are not liable to cover these employment obligations, you may find this government ‘test’ which asks questions that you need to consider to help determine this:

    http://www.fwbc.gov.au/employee-or-contractor

    Also, if you are considering this option, which it sounds as though you are(?), you may first want to consider setting up a Pty Ltd or Ltd company if you have not already to ensure you are not sued personally as a sole trader or individual for anything that may happen to any employee or contractor. This is particularly important for your industry as any issues/errors/problems that the contractor may do or be subjected to, falls back on you, as employee.

    Hope this is helpful.
    Vanessa

    #1164457
    Claud Hamilton
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    Many thanks for your reply Vanessa. It is very much appreciated.

    In answer to your last point, the business is currently registered as a Pty Ltd, so that should eliminate personal liability as I understand it. Also, we have public liability/ professional indemnity insurances in place which we are happy to extend to cover a new hire.

    Superannuation and PAYG withholding commitments are not a concern for us, as we (my partner and I) have been meeting our own super/PAYG commitments for the last couple of years and are prepared to extend the same to a new hire.

    The annual/sick leave entitlement was one of our main concerns. Obviously, we could factor in the cost of leave entitlements and pass those onto the hourly rate that we charge the client.

    Following the link to the test that you provided, it appears that the new hire in our case would be considered an employee. With this in mind, I guess the only other concern would be availability of hours. Since work is to be as-required by our client, it is possible that occasionally there may be no work available for a particular week. The business is not in a position to be able to pay an employee when work is not available. So, as an employer, would we be obliged to cover such eventualities, or could we legally and in good faith include a clause in a Master Agreement stating that work is only available when requested by the end client? In effect, I suppose a 0-hour contract.

    Thanks,
    Claud

    #1164458
    vanessa@legal123
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    Claud Hamilton, post: 190387 wrote:
    Many thanks for your reply Vanessa. It is very much appreciated.

    In answer to your last point, the business is currently registered as a Pty Ltd, so that should eliminate personal liability as I understand it. Also, we have public liability/ professional indemnity insurances in place which we are happy to extend to cover a new hire.

    Superannuation and PAYG withholding commitments are not a concern for us, as we (my partner and I) have been meeting our own super/PAYG commitments for the last couple of years and are prepared to extend the same to a new hire.

    The annual/sick leave entitlement was one of our main concerns. Obviously, we could factor in the cost of leave entitlements and pass those onto the hourly rate that we charge the client.

    Following the link to the test that you provided, it appears that the new hire in our case would be considered an employee. With this in mind, I guess the only other concern would be availability of hours. Since work is to be as-required by our client, it is possible that occasionally there may be no work available for a particular week. The business is not in a position to be able to pay an employee when work is not available. So, as an employer, would we be obliged to cover such eventualities, or could we legally and in good faith include a clause in a Master Agreement stating that work is only available when requested by the end client? In effect, I suppose a 0-hour contract.

    Thanks,
    Claud

    Hi Claud

    Sorry to say this (and please note, I am NOT an employment lawyer) but I don’t think you can ‘pick and choose’ what you want to pay or not and how you categorise employees vs contractors. If they are employees, you owe all holiday, sick pay etc for the full period, irrespective of when and how they work.

    You could try and negotiate with them to accept some weeks off as agreed vacation so you pay for their time not working perhaps (not unlike forced closure on Christmas holidays as some offices do) but you cannot choose when you may/may not pay regulated benefits.

    I am still with Jayne on this one-why in the world would you do it in the first place? And what in particular is preventing the corporate you work with from not taking them on…they surely have more resources than you? Agree=alarm bells.

    regards
    Vanessa

    #1164459
    alliedib
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    Claud Hamilton, post: 190387 wrote:
    In answer to your last point, the business is currently registered as a Pty Ltd, so that should eliminate personal liability as I understand it. Also, we have public liability/ professional indemnity insurances in place which we are happy to extend to cover a new hire.

    Hi Claud,

    Although you are a Pty Ltd, there is the scope that you could personally be held liable if your actions (as a director) cause a third party to suffer a loss.
    You don’t automatically receive blanket protection of your assets just because you have created a company to run your business.
    There are insurance policies that you can consider for this exposure – they are known as Directors and Officers Liability policies and can be bought on their own or as a broader ‘Management Liability policy’. These are becoming more popular as companies are being held accountable for their day to day running of the business.

    The waters are murky definitely when it comes to employees / contractors / workers and your rights and responsibilities with regards to insurance.

    Depending on the way you structuring the agreement with this person, they may be considered a ‘Worker’ by Workers Compensation and require cover by you under a Workers Comp policy. This may be irrespective of whether they are employed or contracted by you.

    Now here is where it gets tricky:
    – An employee is usually granted cover under their employers policies for Public Liability and Professional Indemnity for acts committed in the course of their employment. You should advise your insurer to check that additional skilled staff are automatically covered (sometimes the insurer needs to know their qualifications etc for the PI policy).
    – A contractor/sub-contractor is NOT usually covered by a Principals policy – in this case you should contact your insurer to find out (a) if they are covered; or (b) what it will take to add them to your policy. If they cannot be added to your policy, the contractor will need to take out their own cover.

    The above two are independent of whether the person is deemed to be a ‘worker’ by Workers Compensation.

    Sorry if I have opened a can of worms but I thought I should clarify what is often a common misconception – if you have any further questions or are unsure of any of the above let me know.

    Regards,

    Mark

    #1164460
    Tarsh13
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    I am sorry for my delayed response, I meant to get this to you late last week – apologies.

    If you are engaging the new hire directly as an individual to perform work as directed by you, with the requirement that they submit a timesheet to be paid an hourly rate for work done, it sounds as though the person that you’ll be hiring is a casual employee (rather than an independent contractor, who has an ABN and issues invoices to be paid on completing a piece of work). A casual employee is paid an hourly rate as they are required, with no guarantee / ongoing expectation of regular work. The hourly rate for a casual includes a premium to cover them for permanent employee entitlements (paid sick and annual leave) that they won’t receive. The hourly rate will need to be paid at or above the casual rate quoted in the relevant Modern Award.

    To set the new employee up, you will need to issue a casual employment offer (Fair Work Australia has a template that can help: http://www.fairwork.gov.au/resources/templates/pages/employing-staff ). This offer needs to include the hourly rate of pay and other terms and conditions of employment – at some point you will also need to advise how the employee will record & submit the hours worked.

    Once the offer is accepted, you need to set up the employee on your payroll and will need their TFN Declaration Form and bank account details. You are also legally required to provide the employee with a Fair Work Information Statement ( http://www.fairwork.gov.au/ArticleDocuments/2225/Fair-Work-Information-Statement.pdf.aspx?Embed=Y) and a Superannuation Choice Form so that they can advise which fund you’ll pay their super contributions into (https://www.ato.gov.au/uploadedFiles/Content/SPR/downloads/SPR56761NAT13080.pdf).

    There is some helpful info on setting up an employee & making super payments on the ATO website (https://www.ato.gov.au/business/employers/preparing-to-engage-workers/), which you should definitely read. (Please note that the Superannuation Guarantee is increasing to 9.5% from 1 July 2014.)

    Claud Hamilton, post: 190280 wrote:
    Hi all

    Background:
    I operate a two-person business providing an IT consulting service to a single client. My client (a large US corporation) has approached me with the CV of a guy that they wish to take on as a permanent member of staff, but their internal onboarding process is really slow. However, as they have an immediate need for his services, they wish for us to employee him on a contract basis to be paid hourly rate for hours worked. The idea being that he will become a permanent member of staff of the client after 2-3 months.

    In theory, I have no issue with this as I have been working with this client for 10 years (mostly through an agency, only recently directly).

    However, as we have no legal team nor past experience of taking on new staff, we don’t really know where to start or what our obligations are. The two employees of the business (myself and my partner) draw earnings for hours worked only as directed by the client. If the client has no work, we don’t get paid. We don’t pay ourselves annual leave nor sick pay. As I understand it, this is acceptable when an employee is considered “casual”.

    My questions then are these:

    1. Is it legal to include terms for no sick/annual leave in a Master Agreement for employees as long as the agreement states that the employee is “casual”?
    2. What are our legal obligations, beyond:
      • requesting TFN declaration,
      • witholding PAYG,
      • paying super at 9.25%,
      • payment of wages
      • issuing pay advices
      • where might I find a good (preferably free) Master Agreement (or template) that I can use as employment contract?

    As mentioned above, this new hire is only likely to be with us for a few months and it is unlikely that we will be seeking to take on more staff any time soon, so we need to do this as economically as possible while still ticking all the legal boxes.

    Many thanks for any advice,
    Claud

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