VICDOC Winter 2022 - Magazine - Page 58
INDEPENDENT CONTRACTOR
VERSUS EMPLOYEE
WHAT'S THE DIFFERENCE?
STATUTORY EMPLOYMENT
BENEFITS
––
Employment in Australia is highly
regulated. Employees benefit from
minimum entitlements under the
National Employment Standards
(NES) of the Fair Work Act 2009
(Cth) (FW Act), including four
weeks paid annual leave, and ten
days paid personal (sick or carer’s)
leave per annum (which each
accumulate from year to year) and
paid public holidays. The NES also
provides employees with up to 12
months’ unpaid parental leave.
In Victoria, employees are
entitled under state legislation to
13 weeks long service leave after
15 years’ service continuous service
with the same employer, payable
pro-rata on termination after
7 years.
MONETARY VALUE OF EMPLOYEE
STATUTORY ENTITLEMENTS
––
Some statutory entitlements have
a readily calculable monetary value.
Assuming a regular pattern of
work, annual leave is worth 7.7% of
annual earnings, and long service
leave is worth 1.66% of annual
earnings. Paid public holidays are
worth 5% of annual earnings to a
full-time employee (in Victoria).
Personal leave is only calculable as
a benefit if it is taken, but it makes
available leave to the value of 3.85%
of annual earnings.
SUPERANNUATION
CONTRIBUTIONS
––
Employees are entitled to employer
superannuation contributions
at 10% of their ordinary time
earnings. (Employers are not
obliged to make contributions
on earnings above an indexed
amount, currently $235,680 per
annum). Some individuals working
as independent contractors may
also be entitled to employer
superannuation contributions under
the extended statutory definition of
employee, but that may not always
be complied with.
OTHER LEGISLATIVE
PROTECTIONS
––
The FW Act protects most
employees from unfair dismissal,
and from adverse action taken
by employers for reasons which
include exercising a workplace
right, making a complaint or
enquiry, unlawful discrimination,
or being temporarily absent from
work because of illness or injury.
Employers can face monetary
penalties, and employees may be
entitled to compensation for
losses suffered.
Employees are covered by antidiscrimination legislation, but in
most cases independent contractors
are not. Contractor workers are
only protected under the Equal
Opportunity Act 2010 (Vic) where
they are employees who do work
for a principal under a contract
between their employer and
the principal, that is, in a
“labour hire” arrangement.
COMPARISON
––
Independent contracting is
governed by the general law that
applies to commercial contracts,
and compared to employment is
relatively unregulated. In some
circumstances independent
contractors may have access to
the Federal Court under the
Independent Contractors Act 2006
(Cth) to set aside or vary a
contract that is unfair, harsh or
unconscionable, unjust, or against
the public interest.
Taking into account only
legislated statutory entitlements
(including superannuation) if an
employee and an independent
contractor were on the same
hourly rate the employee would be
24.36% better off in dollar terms
than the independent contractor,
and possibly 28.21% better off.
(In a general practice an
employed doctor on 48% of
billings would be in a roughly
equivalent position to an
independent contractor on 65%
of billings. The employer would,
however, incur additional costs
by way of Workcover insurance
and payroll tax).
INDEPENDENT CONTRACTORS
IN PUBLIC HOSPITALS
––
In areas of work that are covered by
an Award or Enterprise Agreement,
an employee will also benefit
from a more extensive range of
entitlements than the basic NES
provides. For example, a doctor
employed by a public hospital in
Victoria and covered by the AMA
Victoria Specialists’ Enterprise
Agreement is also entitled to:
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