Edited version of your written advice

Authorisation Number: 1012707564194

Advice

Subject: Status of the worker

Issue 1

Question 1

Are the workers engaged through a recruitment agency (the agency), your common law employees as defined in subsection 12(1) of the Superannuation Guarantee Administration Act 1992 (SGAA)?

Answer

No. Refer to 'why we have made this decision'

Question 2

Are the workers your employees by the expanded definition of employee contained in subsection 12(3) of the SGAA?

Answer

No. Refer to 'why we have made this decision'

This scheme commenced on

After 1 July 2013

We considered these to be the relevant facts

You supplied us with the contract between you and the agency and also a filled in Status of the Worker questionnaire. The questionnaire contained the following relevant information:

• You engage the workers through a recruitment agency.

• You do not enter into a written agreement with the workers.

• The worker is not able to negotiate their rate of pay. The rate of pay is contained in the contract between you and the agency.

• Where a worker is deemed unsuitable for whatever reason you would contact the agency in order to rectify the situation.

• The workers do not attend meetings of your business.

• The workers are not entitled to paid breaks.

• The workers perform work at locations required by you after they are engaged through the agency.

• The workers are not directly supervised.

• The workers have the right to refuse work should it be outside their scope of work.

• The workers advise the agency of availability. The workers do not deal with you directly in seeking permission for time off. However the workers would notify you should they be unavailable.

• The workers are able to provide their services to other entities.

• The workers work as a part of a team in your business.

• The workers do not provide any training in your business.

• The workers do not wear a uniform but would use your stationary.

• The workers invoice you for work they perform and you would pay them directly into their bank account.

• The agency determined the rates of pay for the worker.

• The workers are paid per hour and not at the completion of a specific task.

• You do not check to see if a job is completed before you pay a worker.

• You make no reimbursements or payments for anything other than the work workers complete.

• You make no deductions from workers' pay for tax or anything else.

• You gave no directions in regards to whether the worker was required to complete the work personally.

• Should a worker be unable to attend work due to illness, or if a worker went on holidays, the agency would be responsible for finding another worker.

• You are responsible for paying public liability insurance for the workers.

• You supply all materials and equipment necessary for the workers to complete their work.

You informed us that you are unable to deal with any worker directly. All enquiries regarding a specific worker needs to be dealt with through the agency. This includes scheduling work, requesting a specific worker or arranging a replacement worker.

Relevant legislative provisions

Superannuation Guarantee Administration Act 1992 subsection 12(1)

Superannuation Guarantee Administration Act 1992 subsection 12(3)

Reasons for decision

Why we have made this decision

Summary

The facts and evidence suggest that the workers are not your employees for the purposes of the SGAA under either the common law definition or the expanded definition as set out in subsections 12(3) of the SGAA. You therefore do not have an obligation to pay superannuation contributions on behalf of the workers.

Detailed reasoning

The SGAA states that an employer must provide the required minimum level of superannuation support for its employees (unless the employees are exempt employees) or pay the superannuation guarantee charge.

While the term 'employee' which is defined in section 12 of the SGAA, includes common law employees, it also extends to include workers who are engaged under a contract wholly or principally for their labour.

Therefore, it is necessary to consider not only whether there is a common law relationship of employer/employee between the parties, but also whether the expanded definition of 'employee' in subsections 12(3)) of the SGAA apply. If a worker is not an employee under subsections 12(1) and 12(3) of the SGAA there will not be an obligation to make superannuation contributions on behalf of the workers by the principal.

Common law employee

The Courts have considered the common law contractual relationship between parties in a variety of legislative contexts. As a result, a substantial and well-established body of case law has developed on the issue. Consideration should be given to the various indicators identified in judicial decisions. No list of factors is to be regarded as exhaustive and the weight to be given to particular facts will vary according to the circumstances. The totality of the relationship between the parties must be considered to determine whether, on balance, the worker is an employee or independent contractor.

In deciding whether an individual is a common law employee, there are a number of common law factors to consider. The common law factors are:

• Terms of engagement test: What is the nature of the contract between the parties?

• The control test: The degree of control which the payer can exercise over the payee.

• The organisation or integration test: Whether the worker operates on their own account or in the business of the payer.

• The results test: Whether the worker is free to employ their own means and is paid to achieve the contractually specified outcome.

• The delegation test: Whether the work can be delegated or subcontracted (with or without the approval or consent of the principal).

• The risk test: Whether the worker bears the legal responsibility and expense for the rectification or remedy in the case of unsatisfactory performance; and

• Capital provision test: Which party provides the majority of capital equipment and pays the majority of business expenses?

However, the relationship between an employee and employer is contractual. Where there is no contract there cannot be an employment relationship. Superannuation Guarantee Ruling SGR 2005/2: Superannuation guarantee: work arranged by intermediaries sets out the Commissioner's views on tripartite employment arrangements. Paragraphs 12 to 14 state:

12. If there is no contract between the worker and end-user in a tripartite working arrangement, the worker cannot be an employee of the end-user. Similarly, if there is no contract between the worker and the intermediary, the worker cannot be an employee of the intermediary.

13. The manner in which the relationship between the parties to a tripartite working arrangement is labelled or described is not conclusive in determining the nature of the relationship involving the parties to the arrangement. Expressions such as 'employment agency' and 'labour hire firm' that are often used to describe the use of various forms of labour market intermediary have no precise legal meaning.

14. In tripartite working arrangements, it is the ultimate or legal control over the worker that is most relevant; not the day-to-day direction and control.

The explanation section of SGR 2005/2 explains further in paragraphs 32 to 34:

32. In employment arrangements involving an intermediary firm, a worker and an end-user, more than one contract is often formed. In these arrangements, it is first necessary to determine whether a legal relationship exists for the performance of work and with whom it exists. Only after this has been established can consideration be given to the issue of whether the relationship is one of employment or of some other kind. The question of whether the worker is an employee of the intermediary or of the end-user depends on the particular circumstances as disclosed by the facts found. The totality of the relationship between the parties must be considered.

33. The manner in which the relationship between the parties is labelled or described is not conclusive of the nature of the relationship involving an intermediary, worker and end-user. Expressions such as 'employment agency' and 'labour hire firms' are often used to describe the use of various forms of labour market intermediary. These terms have no precise legal meaning. In these tripartite working arrangements, it is necessary to look beyond the form of the contractual relationships and the labels attached to the relationships by the parties to establish the true nature of the relationships of the parties involved.

34. The relationship between an employer and an employee is contractual. An employment relationship cannot exist in the absence of a contract. The indicators listed by the courts in determining whether a contract is one of employment can only be applied once it is determined that a contract exists. They cannot be applied to determine whether a contract exists in the first place. The issue of whether a contract exists is a separate and distinct matter from the categorisation of a contract as one of employment or otherwise.

Therefore we need to establish firstly where a contract exists before we can apply any common law tests.

In your case the workers are engaged through a recruitment agency. You have a written contract with the agency but not with the workers. The following factors indicate that the contract is solely between you and the agency:

• You do not enter into a written agreement with the workers but only with the agency.

• The workers are not able to negotiate their rate of pay with you directly. The rate of pay is contained in the contract between you and the agency.

• Should a worker be unable to attend work due to illness, or if a worker went on holidays, the agency would be responsible for finding a replacement.

• The workers advise the agency of availability. The workers do not deal with you directly in seeking permission for time off, even though they might notify you of availability.

• You make no deductions from workers' pay for tax or anything else.

• Where a worker is deemed unsuitable for whatever reason you would contact the agency in order to rectify the situation.

• The agency offers a replacement guarantee on the workers they provide

• The worker does not attend meetings of your business.

• You are unable to deal with any agency worker directly. All enquiries regarding a specific worker need to be dealt with through the agency.

These factors clearly indicate that you do not have a contract with the workers directly.

As there is no contract between you and the workers, ultimate control over the workers do not lie with you. This is the case even though you might have day to day direction over the worker. As per paragraph 12 of SGR 2005/2 there cannot be an employment relationship between you and any workers engaged through the agency if no contract exists between you and the workers.

As the facts and evidence indicate that the workers are not your employee under common law, we are required to consider the expanded definitions of employee under subsection 12(3) of the SGAA.

Expanded definition of employee for under Subsection 12(3) of the SGAA purposes

The expanded definition of employee within subsection 12(3) of the SGAA, which states:

If a person works under a contract that is wholly or principally for the labour of the
person, the person is an employee of the other party to the contract.

SGR 2005/1 explains when an individual is considered to be an 'employee' under section 12 of SGAA.

Paragraph 78 of SGR 2005/1 states that where the terms of the contract, in light of the subsequent conduct of the parties, indicate that:

• the individual is remunerated (either wholly or principally) for their personal labour and skills;

• the individual must perform the contractual work personally (there is no right to delegate); and

• the individual is not paid to achieve a result.

the contract is considered to be wholly and principally for the labour of the individual engaged, and he or she will be an employee under subsection 12(3) of the SGAA.

In your case there is no contract between the parties. Similarly to the common law test there cannot be an employment relationship established under the expanded definition under section 12(3) of the SGAA if there is no contract in the first place.

Conclusion - overall

Upon considering all the available facts and evidence, the Commissioner is satisfied that with respect to work performed for the principal, that the workers do not meet the definition of an employee for the purposes of the SGAA under either common law or the expanded definition provided under subsection 12(3) of the SGAA. Accordingly you do not have an obligation to pay superannuation contributions for the benefit of the workers under the SGAA.

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