Is that a worker you've hired?
You’ve engaged a contractor who has their own ABN and pays their own tax, so this excludes them from being a worker and you don’t have to declare their wages. Right? Well, not necessarily.
WorkCover Queensland Customer Services Manager, John Kinnane breaks down some of the complex indicators outlined in the Workers’ Compensation and Rehabilitation Act 2003 (the Act) to help you work out if someone you’ve hired should be covered under your policy.
While there are many elements used to determine if someone is deemed a worker according to the Act, meaning you will need to cover them under your workers’ compensation insurance policy, there are three main points to consider as John explains.
The three main points...
- is the person employed under a contract of service?
- is the person employed for substantially labour only, and
- does the person meet the results test.
If the answer is ‘no’, or the criteria is not met for the first two points, we then apply the results test.
Contracts of service
“The first step, a contract of service…generally represents the relationship between an employer and an employee; you’re paying wages for that person (PAYG).
“For example, a worker comes to you, they have an injury, we get a claim. We first look at if they working under a contract of service, so a standard employer-employee relationship, which makes up a large part of the workforce. If they’re not because they invoice as a sole trader, they’ve got an ABN and they’re being paid pursuant to that regime, so the first point hasn’t been met, we will then look at the next step: do they work for substantially labour only,” John said.
Do they work for substantially labour only?
This step involves identifying if the person is engaged for labour only or substantially labour only. “If you have a sub-contractor who comes on site and provides labour only, he’s going to be considered a worker and you will need to declare those wages. We determine this by looking at what the person is paid for, not how they are paid.”
If the payment is mainly for the return of services provided such as labour, the person will be considered a worker. “A sub-contractor invoices you, the invoice says Michael Jones, ABN billed for 45 hours work at $2000, that’s a fair indicia the person is engaged for substantially labour only and you need to declare their wages,” John added.
“However, using the case of a plasterer, if they’re invoicing you for a set job and they’ve provided the plaster board, all of the plaster and other materials needed to complete the job, it would indicate the job isn’t for substantially labour only; it’s for the provision of plant, equipment and materials as well.”
This is because if the overwhelming proportion of the remuneration is for the provision of substantial plant, equipment and materials, then the person is not engaged for substantially labour only and is not a worker under this test.
The results test
“Then there’s the results test, which comes into play when a person is not working under a contract of service or for substantially labour only.” For a person to be excluded as a worker, they have to meet all three elements of the results test. “The three elements that must be met in order to exclude a person from being a worker are:
- is the person paid to achieve a specified result or outcome, and
- do they have to supply the plant, equipment or tools of trade needed to perform the work; and
- is, or are they, liable for costs to rectify any defects in the work they perform.
If you answer no to one or more of these questions, the person is likely to be a worker. If you answer yes to all three questions, then you will not need to cover them for workers’ compensation,” John said.
Watch John's presentation at the recent construction forum and learn more on who is considered to a worker on our website. “When in doubt, speak to your relationship manager or call us on 1300 362 128,” John said.
- Last updated
- 02 May 2017