Working with global contractors can help your company grow. Before you begin searching for these professionals, you should understand the legal framework and how to approach this worker relationship.
Hiring independent contractors in Australia
Before you enter an agreement with an independent contractor in Australia, you must understand the laws surrounding contractors.
Employees vs. contractors
The distinction between employees and independent contractors is essential to ensure compliance. In Australia, employees are hired by employers to provide services through personal labor. In return, the employer provides a regular salary or wage.
Independent contractors conduct business by providing services. The country recognizes that contractors do not have the duty of loyalty to those who hire them like employees would.
Independent contractors also operate according to their own schedules, provide their own equipment, and work on specific projects rather than on an ongoing basis.
Penalties for misclassification
Classifying someone as a contractor when they’re not one can bring about a range of penalties. Misclassification may lead to:
- Paying all withholding tax for the period of employment
- Back pay of superannuation contributions with interest
- Large fines, especially if the company is found to be intentionally misleading
How to hire independent contractors in Australia
The hiring process for independent contractors will look different from employees. Following these three steps can help you build successful contractor relationships.
1. Carefully conduct interviews
During the interview process, it’s essential to focus your initial meeting on project needs and objectives.
Rather than learning about character traits and how a contractor will fit into your company’s culture, focus on specialized skills and the experience that will help the contractor complete the task. This approach will emphasize your need for project-based services over employment.
2. Create a service agreement
While independent contractors will not need to receive required benefits like superannuation contributions or leave time, creating a service contract is still a vital step. Clarifying terms for this business transaction will prevent any unlawful terminations or disputes about the relationship. You should include:
- A description of the project to be completed
- Termination conditions
- Payment method and schedule
3. Introduce necessities
While independent contractors have the freedom to complete a project in the way they see fit, a brief introduction to the company can help familiarize them with the workflows and tools.
Introduce them to the contacts within the company and anyone they might collaborate with. You can also clarify your process for assessing the project.
How to pay independent contractors in Australia
While employees typically receive pay periodically for hours and days worked, contractors are usually paid once their service is complete. This amount should be predetermined in your service agreement before a contractor begins working for you. Your contractors should provide a receipt of this service fee once the task is complete.
Independent contractors are also responsible for their own tax obligations, so you will not need to withhold any sum for the relevant tax authorities.
Termination of independent contractors
You may only terminate an independent contractor if they fail to perform the obligations outlined in the contract terms, by mutual agreement, or if the contract allows for termination at a specified time. If you terminate an independent contractor outside of these terms, the legal system will determine the termination unlawful.
Turn to G-P when hiring independent contractors in Australia
As an extension of G-P’ Global Growth Platform™, G-P Contractor allows companies to hire anyone, anywhere, for both short- and long-term projects. Whether you’re hiring employees or contractors, we streamline the process with a single solution for your global workforce. Contact us to learn more.