Employees versus Independent Contractors - Part 4

Posted on 04 June 2013

Part 4 - Statutory Entitlements for Independent Contractors

In the final chapter of our Blog Series on- Independent Contractors s vs Employees we look at the statutory rights of contractors. Even in circumstances where a business relationship is defined as a contract for services and falls outside the jurisdiction of the Fair Work Act 2009 business owners may still be liable to pay statutory entitlements to those contractors.

Contractors and superannuation

It is not commonly known however, under section 12(3) of the Superannuation Guarantee Act 1992 a business will be required to make superannuation contributions to contractors where the contractor:

  • is paid wholly or principally for their personal labour and skills;
  • performs the contract work personally; and
  • is paid for hours worked rather than to achieve a result even if they quote an Australian Business Number (ABN).

any businesses that we speak with have no idea of their liability to pay their contractors super and have amassed significant super liabilities to their contractors over the years. A very careful review of their circumstances is required and well thought out approaches required to deal with this very difficult situation.

Contractors and Independent Contractors Act 2006

In 2006, the government enacted the Independent Contractors Act 2006 (IC Act). The IC Act was devised to continue to allow independent contractors to make their own commercial decisions free from the constraints of industrial and employment law while creating a national, uniform system to resolve unfair contracts claims. However, the IC Act does not prohibit state governments from legislating in relation to specific categories of out workers and owner drivers.


The term ‘outwork’ generally refers to work performed outside the employer’s premises, factory or established place of work. Under the Fair Work Act 2009, an ‘outworker’ is defined to mean:

  • an employee who, for the purpose of the business of his or her employer, performs work at residential premises or at other premises that would not conventionally be regarded as business premises; or
  • an individual who, for the purpose of a contract for the provision of services, performs work in the textile, clothing or footwear industry, and at residential premises or at other premises that would not conventionally be regarded as business premises.

New South Wales laws dealing with outworkers are not excluded by the Fair Work Act 2009 and continue to apply today. As a result arrangements for outworkers are generally subject to New South Wales regulation, in addition to any provisions contained in the applicable Modern Award.

In New South Wales outworkers continue to be covered by state based 'contract determinations', which are similar to federal and state industrial awards. The following legislative instruments provide coverage for outworkers:

  • Industrial Relations Act 1996;
  • Industrial Relations (Ethical Clothing Trades) Act 2001; and
  • NSW Ethical, Clothing Trades Extended Responsibility Scheme 2005.

Owner Drivers

Another category of independent contractor that is governed by New South Wales law is that of owner drivers, which also includes sole traders providing a couriering service. Owner drivers are covered by chapter 6 of the Industrial Relations Act 1996 which allows for 'contract determinations' to be made by government in relation to the transport industry.

Contract determinations, such as the Transport Industry – Courier and Taxi Truck Contract Determination, establish minimum requirements for both the principal contractor and the contract carrier to meet in regard to their contract for labour, hire or services. Under the current contract determinations, own drivers are entitled to receive both superannuation contributions and the payment of a fuel levy from the principle contractor as well as a minimum base rate of pay.

For more information on employees, contractors and liability for employers to pay statutory entitlements please contact us.