(1) The University regularly engages people and companies to provide a range of services on a temporary basis. In some circumstances it may not be clear whether the arrangement should be one of employer/employee or whether the person(s) may be engaged as an independent contractor. (2) This policy outlines the process to be followed in determining the nature of engagement, and the subsequent relationship between the University and external consultants and contractors (i.e. individuals, independent contractors and/or service entities such as companies and trusts, not covered by an award/and or enterprise agreement). (3) The policy is designed to assist in determining whether a proposed engagement and subsequent payments made to external parties should be paid as employees through the University's payroll system, or whether they can be paid through accounts payable under normal purchasing processes. A considered determination will promote legal compliance. (4) The policy has been developed to assist the University in meeting its legal obligations and limiting its exposure to penalties for misrepresentation, breach and non-compliance. By necessity the policy focuses on legislative requirements. (5) There are separate University policies on the Engagement and Use of Consultants, Additional Work, External Work, Recruitment and Selection and University Procurement Policy. These can be accessed on the University's Policy DDS. (6) The policy does not apply to University engagements undertaken with service firms nor labour hire firms. (7) For the purpose of this Policy the following definitions apply: (8) a. Contract of Employment - means a contract under which a person (the employee) is employed in return for some benefit or remuneration from the employer. As a general rule, if the contract gives the employer right of control over the employee's manner of doing the work, it is an employment contract, rather than one for services. (9) The employment status of external parties undertaking work for the University will be determined, for the purposes of taxation, following consideration of the indicative factors which are found in Section 5. (10) The determination of employee or contractor status for taxation purposes will be made at or before the time of employment or engagement by the relevant Unit Head. (11) The University is required to meet its obligations in respect of: (12) a. Pay-As-You-Go (PAYG Withholding) under the Taxation Administration Act 1953; (13) The University can be subject to substantial financial penalties if it fails to meet these obligations. (14) Wherever possible the University will engage individuals as employees to ensure that they are adequately covered for liability insurances and workers compensation purposes. (15) Persons performing functions such as teaching, research, administration and other classes of work similar to those performed by existing University staff will be treated by the University as employees for the purposes of income tax (PAYG), superannuation guarantee, FBT, payroll tax and workers compensation guidelines. All additional work undertaken by existing University staff will be paid via the University payroll system and PAYG deducted as appropriate. (16) The onus is on any individual or service entity who considers that they are exempt from a particular categorisation made by the University to present evidence of their exemption from the requirements of PAYG withholding and Superannuation Guarantee contributions to the University's satisfaction. (17) The policy applies to all academic and administrative units within the University. (18) This policy also applies to organisations that are fully owned entities of the University. It does not cover such related organisations as: childcare centres; student associations, clubs and societies; and student unions. (19) PAYG withholding obligations will apply to the University in respect of various payments it makes. PAYG withholding is required (but is not limited to) the following payments: (20) a. Payment of salary, wages, commission, bonuses or allowances it makes to an individual as an employee. (21) It should be noted that "employee" under the PAYG system means an employee at common law (that is, a concept developed over time by the Australian Courts). (22) The University in making such payments is required to withhold an amount from the payment it makes and remit that amount to the Australian Tax Office. Therefore, it is essential that the nature of the relationship, discussed in the context of this policy, is established and determined at or before the time work is commenced. (23) To assist the University in making this determination, this policy provides guidelines which will help assess the status of the individual who is being employed or engaged. The Guidelines include further discussion on the common law concept of "employee" and "contractor". (24) Once a determination has been made that an arrangement is indeed one of independent contractor/principal there will be no PAYG withholding provided that the entity/individual supplies the University with a valid ABN and documentary evidence of incorporation, establishment of trust or registration of partnership. (25) N.B. The fact that a contractor has an ABN is not determinative of whether they are an employee or a contractor. A contractor who has an ABN and carries on a business in their own right may still be an employee in certain circumstances when performing work for another person. (26) Payment for any work undertaken by a University staff member, even if through an interposed entity, will be made through the payroll system in accordance with the Additional Work Policy. (27) Payroll tax is calculated on wages paid by an employer to its "employees" and is charged by all Australian States and Territories. The definition of wages is very broad and includes wages, salary, allowances, commissions and benefits etc paid to employees but also payments made to certain independent contractors. The NSW legislation deems contractors to be 'employees' where a "relevant contract" exists. A payroll tax obligation may arise. (28) A relevant contract is one where a person supplies services, for or in relation to work, to another person in the course of carrying on a business. A relevant contract does not refer to a contract of service or a contract which provides services which meet a limited range of exemptions contained in the payroll tax law. (29) The exemptions from payroll tax include the following situations: (30) a. where services supplied are ancillary to the supply of goods under the contract; (31) Because the definition of "relevant contract" is wide, Section D of the Obligation Checklist will need to be completed to allow determination if payroll tax is payable on any payment made to contractors. (32) The University is liable to pay Workers Compensation premiums on payments made for essentially labour only services provided to the University under a contract for services. (33) Workers Compensation premiums are calculated on rateable remuneration. This includes: contract payments for essentially labour only services and payment to contractors who are or who supply deemed workers. Contractors which are companies are included. (34) Section E of the Obligation Checklist will need to be completed to determine if the contractor will be deemed a worker for the purposes of workers compensation. (35) The University is required, under the Superannuation Guarantee (Administration) Act 1992 ("the superannuation guarantee legislation"), to contribute towards the superannuation of some contractors. (36) Under the superannuation guarantee legislation, an employee includes a person engaged under a contract that is wholly or principally for labour. This means that a contractor (the party to the contract) can be considered to be an employee under the superannuation guarantee legislation. A contract is principally for labour if more than 50% of the value of the contract is for the person's labour. Even if a contractor quotes an ABN, they may be considered an employee for the purposes of the superannuation guarantee legislation. (37) The superannuation guarantee legislation does not apply when a contract is made with someone other than the person who will provide labour. For example, there is no obligation under the superannuation guarantee legislation if the contract is with a company or partnership. (38) The procedures outlined below should be applied to clarify, validate and justify an engagement status decision. Note: the normal appropriate University appointment or tender processes should be followed in conjunction with these procedures. (39) A decision is made by the delegated officer to employ or engage the services of an individual or service entity. (40) Guidelines to assist in the determination whether an individual should be engaged as an employee or a contractor are set out in Section 5. (41) Obligations in respect of the various taxes and payments may, however, extend beyond common law employees to also include contractors in some situations. This extended concept of employee is explained in Section 3 for each relevant obligation. (42) Part B of this Section sets out the steps to follow to assist in the determination any additional obligations on the part of the University. (43) The Unit Head submits a letter of engagement and contract for services to the Director for authorisation. Within a School, the letter of engagement and contract for services is authorised by the Dean. A standard template is available on the Office of Legal Counsel website. (44) Where variations to the standard template are required, advice should be sought from the Office of Legal Counsel. (45) The Director /Dean then forwards the signed and authorised contract for services to the contractor. (46) Independent contractors must complete a Sub-contractors Statement and submit it to the School/Unit prior to commencing agreed services. Independent contractors must also provide certificates of currency for liability insurances and workers compensation/accident insurance policies to the School/Unit on a regular basis so as to maintain their engagement with the University. (47) The contractor submits tax invoices for services as agreed in the contract for services. (48) Tax invoices are authorised by the delegated officer for payment. (49) A copy of the Independent Contractor Evaluation Declaration and Obligation Checklist is submitted with the contractor's first tax invoice for payment. (50) All authorised tax invoices are submitted to Accounts Payable, Finance Office and processed through the general ledger for payment in accordance with University procedures. (51) Any grievances arising from the application of this policy shall be referred to the Deputy Vice-Chancellor and University Provost. (52) The University will develop a process for reviewing the effectiveness of this policy. Where applicable, the review will take account of necessary changes to other relevant University policies and procedures. Suggestions for improvements to the policy may be forwarded to the Vice-President, Finance and Resources. (53) Section 5 lists a number of indicative factors to consider in assessing whether the individual is an employee or contractor. (54) Where the individual is assessed as an "employee" payment for the provision of services in this relationship will be paid through the PAYROLL into a nominated bank account. As an employee the individual will be subject to the deduction of PAYG tax withholding following normal employment processes. (55) In the case above there is no need to proceed in the obligation assessment procedure as the following obligations/payments will apply and will be addressed through the payroll system: (56) a. superannuation guarantee (SG); (57) Where an individual is assessed as a 'contractor' Sections B to E of the Independent Contractor Evaluation Declaration and Obligation Checklist needs to be completed by the Unit Head to enable consideration of any further obligations that may arise. (58) Forward completed Independent Contractor Evaluation Declaration and Obligation Checklist to the Accountant, Taxation and Insurance who will assess if any obligations arise in relation to Payroll Tax, Workers Compensation and the Superannuation Guarantee levy. The declaration/checklist must be accompanied by a copy of the Sub-contractors statement, evidence of relevant insurance coverage, a copy of the letter of engagement and a copy of the contract for services. (59) The relationship between an employer and an employee is a contractual one. It is referred to as a contract of service. This is contrasted with the independent contractor/consultant/principal relationship, which is a contract for services. The difference is essentially that an independent contractor/consultant contracts to achieve a result, whereas an employee contracts to provide his or her labour to enable the employer to achieve a result. (60) Generally, an employee of an organisation bears little exposure to risk of the costs or commercial losses. In examining the risk to determine the independence of the contract, the higher degree to which a person is exposed to a commercial loss, the more likely they are to be regarded as an independent contractor. The general rules, which have developed in law, for determining when a worker is an employee or independent contractor/consultant, are fairly easy to state. However, their application to a factual situation can sometimes prove difficult. It is only with a detailed examination of the facts relating to each engagement that the relationship can be defined. Examination of the conditions applicable to the engagement can assist in establishing the nature of the relationship. (61) The main factors to consider in determining whether a worker is an employee or an independent contractor are outlined below; (62) Whilst the above factors have been identified and acknowledged by the courts as indicators of the nature of the relationship — individual factors are only a guide and no single factor in the table is determinative. It is necessary in each case to examine all the terms of the arrangement to determine whether, on balance, the relationship is that of an employee or an independent contractor.Engagement of Independent Contractors Policy
Section 1 - Purpose and Context
Section 2 - Definitions
Section 3 - Policy Statement
PAYG
Payroll Tax
Workers Compensation
Superannuation Guarantee Levy
Section 4 - Procedures
Part A - Elements of the Engagement Process
Determining the Need for a Service
Establishing Employment Status
University Legal Obligations
Preparing the Contract for Services
Payments to Contractors
Grievances
Review
Part B - Assessing the Universities Obligations
Step 1
Step 2
Step 3
Section 5 - Guidelines
Assessing the Nature of the Relationship
Factors to Consider
Employee
Contractor
Control over Work
The University has an implied right within industrial law to direct and control the work of an employee. The employee works in the business of the employer and the employer is free to manage their business as they see fit.
The University has a right to specify how the contracted services are to be performed. However, such control must be specified in the terms of the contract, otherwise the contractor is free to exercise their own discretion
Independence
An employee performs work for the University in accordance with an employment contract.
A contractor performs services as specified in a contract with the University and provides additional services only by agreement.
Payment
Payment is often based on the period of time worked, but an employee can also work on 'piece rates' or commission.
Payment is dependent on the performance of the contract services
Commercial Risks
An employee generally bears no legal risks in respect of the work; since the employee works in the business of the University, the University is legally responsible for any work performed by the employee.
A contractor bears legal risk in respect of the work. They have the potential to make a profit or loss, and must remedy any defective work at their own expense.
Ability to Delegate
An employee performs the work personally and generally cannot subcontract the work to someone else.
Unless otherwise specified in the contract, a contractor can subcontract or delegate the work.
Tools and Equipment
The University, except when specifically agreed otherwise, usually provides tools and equipment.
Generally, a contractor provides their own tools and equipment
Manner of Performance
An employee performs work at request of University and work is an integral part of business of the University.
Contactor maintains a degree of discretion as to how work is performed, although there may be requirements as to materials used and method of performance. Although work of contactor is done for the University's business, it is not integrated into it.
Place of Performance
Employee usually performs work on the University's premises using University assets and equipment.
Contractor generally provides all their own assets and equipment. Work can be performed anywhere.
Hours of Work
Worker works set hours usually determined by the University
Worker sets the own hours
Expenses
Generally reimbursed for expenses in course of performing the work
Generally incurs own expenses.
Appointment
Generally recruited through an advertisement by University
Worker likely to advertise services to public at large
Termination
University reserves right to dismiss worker
University may only terminate contract without penalty if worker has not met conditions of contract. Contract contains terms dealing with breaches by either party.
View Current
This is not a current document. It has been repealed and is no longer in force.
b. Contract of Service - means a contract under which a person is engaged in the service of an employer to do such work as is contracted for and where the employer directs what is to be done.
c. Contract for Services - means a contractual arrangement by which one person or organisation agrees to provide workplace services to another. The contract is between two principals (a person or organisation) and neither is the employer of the other; the person providing the services is an independent contractor. Also known as 'contract by performance'.
d. Deemed Employee - means a person who the University contracts wholly or principally for the supply of their labour and who is unable to delegate responsibility to another person for the completion of the contract. Labour includes intellectual and artistic effort as well as physical effort.
e. Independent Contractor - means a person who contracts to perform work for another person or organisation, but is not employed by that person or organisation. An independent contractor undertakes to produce a given result, the agreed payment becoming payable when the contractual conditions have been fulfilled.
Top of Pageb. payroll tax on 'wages' paid to employees and certain contractors under the Pay-Roll Tax Act 2007;
c. workers compensation under the Workers Compensation Act 1987 (NSW)
d. superannuation guarantee contributions under the Superannuation Guarantee (Administration) Act 1992;
e. fringe benefits tax under the Fringe Benefits Assessment Act 1986;
f. the Independent Contractors Act 2006 and Independent Contractors Regulations 2007; and
g. Taxation Ruling TR2005/16.
b. Payments it makes for a supply where the payee does not provide an Australian Business Number (ABN).
b. where services supplied are not ordinarily required by the University and are provided by a person who ordinarily provides those services to the public generally;
c. where the services are ordinarily required for less then 180 calendar days in a financial year;
d. where the services are provided by one contractor for 90 working days or less in a financial year;
e. where the incorporated entity employs two or more persons to perform the work under the contract; and
f. where the Payroll Tax Commissioner is satisfied that the contractor ordinarily renders services of the type under the contract to the public generally. The contractor will need to provide evidence of the Commissioner's determination.
b. workers compensation; and
c. payroll tax.