Edited version of your written advice

Authorisation Number: 1051506084789

Date of advice: 18 April 2019

Ruling

Subject: Status of the worker

Question

Are the workers considered your common law employees under subsection 12(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Answer

Yes

Refer to ‘Reasons for decision’

This ruling applies for the following period

1 July 2017 to 30 June 2018

This scheme commenced on

1 June 2017

Relevant facts and circumstances

We considered these to be the relevant facts

We received an application for administrative binding advice regarding the superannuation guarantee obligations for the Payer. The application for administrative binding advice advised the following:

● The Payer provides seed cleaning services.

● The Payer has X processing plants in different regional centres that independently grade and pickle grain.

● Each processing plant is operated by either an employee of the Payer or a worker.

● Each employee of the Payer is paid on an hourly basis. The employees of the Payer have PAYG amounts withheld from their pay and also receive superannuation guarantee contributions calculated at 9.5%.

● The workers engaged by the Payer also have PAYG amounts withheld from their pay and receive superannuation guarantee contributions calculated at 9.5%.

● The workers have been engaged by the Payer on a seasonal arrangement from October through to May and are required to operate the processing plant at their respective sites.

● There is no written agreement as to their engagement. It is an autonomous role and one of the workers has been engaged since 1993.

● The assigned responsibilities of the workers include:

● Setting up and using the processing plants to grade and pickle seed.

● Supervising the grading and pickling of seed to ensure no mistakes or faults are made (rectified at the cost of their own time).

● Maintaining the processing plants and repairing any minor faults (in their own time).

● Reporting any major faults to the Payer.

● Cleaning the processing plants in-between loads to ensure no cross-contamination.

● Storing grain seconds and organising their transport offsite in a timely manner.

● Engaging, training and delegating tasks to junior maintenance workers.

● Submitting paperwork in an accurate and timely manner to the Payer so that all growers can be invoiced for the seed cleaning services provided.

● Effectively managing their own flexible working arrangements by procuring and scheduling seed cleaning services including taking and managing bookings.

● Communicating regularly with the Payer.

● The Payer renumerates the workers on a piecemeal basis per tonne graded.

● The rate set by the Payer represents the workers’ share of the turnover which is reduced by estimated overheads (including lease of the processing plants) such that the net fixed rate per tonne is agreed on at the start of the season.

● The total remuneration received by the workers per annum fluctuates as it is dictated by seasonal conditions.

● The workers do not accrue any form of leave. However, they do have discretion regarding the times, number of hours and quantum of work undertaken.

● The workers have their own Australian Business Numbers and are able to prioritise their own business ventures over their assigned responsibilities at the processing plants owned by the Payer.

● One of the independent contractors operates a company whilst the other is a sole trader.

We were provided with a Superannuation Guarantee Status of the worker questionnaire Principal/Payer completed by the Payer for one of the workers. We were advised that the completed Superannuation Guarantee Status of the worker questionnaire Principal/Payer represented the circumstances for both workers engaged by the Payer and that permission would need to be obtained from the Payer before either of them could be contacted. The completed Superannuation Guarantee Status of the worker questionnaire Principal/Payer advised the following:

General Information:

The worker is a processing plant operator for the Payer and is responsible for:

● Setting up and using the processing plant to grade and pickle seed.

● Supervising the grading and pickling of seed to ensure no mistakes or faults are made.

● Maintaining the processing plant and repairing any minor faults.

● Reporting any major faults to the Payer.

● Cleaning the processing plant in-between loads to ensure no cross-contamination.

● Taking bookings and completing paperwork correctly.

● Maintaining good storage of grain seconds and organising their transport offsite in a timely manner.

Terms and circumstances - formation of the contract:

● The worker was engaged by the Payer through word of mouth and is responsible for operating the processing plant owned by the Payer.

● There is no written agreement between her/him and the Payer.

● The worker is paid on a piecemeal basis per tonne graded and is not able to renegotiate their rate of pay or terms and conditions.

● There are X other workers engaged by the Payer on the same or similar basis.

Control Test – the lawful right to command:

● The worker initially received training from the Payer which included demonstrations, verbal training and supervision of work for the first X weeks. However, she/he is now required to complete their assigned responsibilities autonomously with no ongoing training provided by the Payer.

● The worker has discretion regarding the actual times she/he works. However, this does depend on the number of bookings made.

● The worker is not required to attend meetings within the Payer’s business or with their clients.

● The worker is not entitled to paid breaks.

● The worker’s assigned responsibilities are not scheduled by the Payer.

● The worker is required to complete their assigned responsibilities at the fixed location of the processing plant owned by the Payer.

● The worker cannot refuse to complete an assigned responsibility.

● The completion of their assigned responsibilities are not quality assured by the Payer.

● The worker only contacts the Payer in situations where a dispute cannot be immediately remedied between themselves and a grower.

● The worker must provide prior notice to the Payer before taking any time off during their seasonal arrangement.

Integration Test – did the worker/payee work for themselves or in the business of the principal/payer:

● The worker can provide her/his services to other individuals or businesses when she/he is not working for the Payer during her/his seasonal arrangement.

● The worker works alone.

● The worker is not required to train, supervise or assess the work of other workers engaged by the Payer as each processing plant is in a set location and she/he needs to remain there to complete her/his assigned responsibilities.

● The worker was not provided with any items promoting the Payer’s name or logo. However, she/he has bought her/his own uniform.

● The Payer does not advertise on the processing plant, assets or tools used by her/him.

● The worker does not advertise her/his business on any of the equipment, assets or tools she/he uses.

Results Test – was the worker/payee paid to achieve a specified result:

● The worker is not required to submit quotes, invoices or any other type of document to the Payer rather she/he is paid on a piecemeal basis per tonne graded. The tonnes graded are recorded in a docket book which she/he sends to the Payer to process for her/his remuneration.

● The worker cannot set her/his own fees or rates of pay for the completion of her/his assigned responsibilities.

● The rate of pay she/he receives has never changed.

● The remuneration she/he receives is dependent on the seed she/he grades.

● The Payer does not do any checks to confirm that she/he has completed her/his assigned responsibilities before she/he receives her/his remuneration.

● The worker is paid directly into her/his bank account.

● The worker does receive superannuation guarantee contributions and is covered by the Payer’s workers compensation policy.

Delegation/Substitution Test – was the worker/payee expected to complete the work personally:

● The worker was not provided with any specific instructions from the Payer indicating that her/his assigned responsibilities had to be completed by her/him personally.

● The Payer is responsible for arranging work to be completed if she/he is unwell, on holidays or has a long term absence. No arrangement is made by the Payer if she/he is absent for a short period.

● The Payer does not allow her/him to organise for her/his assigned responsibilities to be completed by another worker in their business or any other person. However, the Payer does allow her/him to organise for her/his assigned responsibilities to be completed by another person engaged by her/him.

Risk Test – did the worker/payee bear any commercial or personal risk:

● The Payer is responsible for paying for workers compensation, public liability insurance as well as plant and building insurance. No claims have been made against any of these policies.

● The worker is not required to guarantee the quality of her/his work for a period of time as the services provided cannot be undone over time.

● The worker is responsible for correcting any mistakes in her/his own time. However, she/he is not responsible for paying for any breakages or materials used.

Provision of tools and equipment - payment of business expenses:

● The Payer does not supply or reimburse her/him for any assets, equipment or tools used to complete her/his work such as a car, mobile phone, laptop computer, hand tool or ladder.

● The worker is required to provide her/his own protective gear to wear which includes boots and safety masks.

We were provided with copies of grading dockets and summaries completed by the workers which showed multiple loads and the remuneration for grading those loads. We were also advised the following:

● Each processing plant has an estimated value of $X and is owned by the Payer.

● The replacement cost for each processing plant is much higher.

● Junior maintenance workers are engaged by the workers but on an infrequent basis.

● The workers submit a docket book that records the various loads of graded and pickled seed which represent the services provided.

● No invoices have been issued by the workers to the Payer rather remuneration is shown on a payslip and a PAYG payment summary is issued by the Payer at the end of the income year.

We were advised the following:

● The other business venture undertaken by one of the workers is a specific spraying business.

● The growers call the workers directly to book their seed cleaning services.

● The workers and the employees of the Payer have different assigned responsibilities. The year is split into two periods for the employees of the Payer. The grading period starts at the beginning of the local harvest season and ends once all seed has been cleaned and pickled whilst the maintenance period is any time the grading process is not being done and involves general maintenance of the sheds and equipment. The workers are only required to clean and pickle grain and have discretion regarding their times, number of hours and quantum of work undertaken. They are not required to do any maintenance during the maintenance period and do not accrue annual or long service leave.

● The employees of the Payer are only required to fix their mistakes in their own time during the grading period but not during the maintenance period.

We confirmed that a completed Superannuation Guarantee Status of the worker questionnaire Worker/Payee from the workers would not be provided and that interpretative guidance should be provided instead.

We issued interpretative guidance on the definition of an employee for the purposes of the SGAA.

We were advised that the Payer was now considering reapplying for administrative binding advice. A Superannuation Guarantee Status of the worker questionnaire Worker/Payee was requested as well as confirmation of the other relevant documentation required.

We provided interpretative guidance on how to apply for administrative binding advice as well as the other relevant documentation required. We also provided a Superannuation Guarantee Status of the worker questionnaire Worker/Payee and a Private ruling application form.

We received a completed Private ruling application form. We also received a further copy of the Superannuation Guarantee Status of the worker questionnaire Principal/Payer completed by the Payer, a Superannuation Guarantee Status of the worker questionnaire Worker/Payee completed by each of the workers as well as a payslip and bank statement from the workers. The completed Superannuation Guarantee Status of the worker questionnaire Worker/Payee from the workers advised the following:

General information:

● She/he is a processing plant operator for the Payer.

● She/he is required to take bookings for seed appointments, operate the processing plant, provide customer service and perform general maintenance.

Terms and circumstances - formation of the contract:

● She/he was engaged through word of mouth.

● She/he did not enter into a written agreement with the Payer but rather verbally applied for the position as a processing plant operator. When she/he was told he was successful, she/he was trained by another operator at the start of the season.

● She/he is not able to renegotiate her/his rate of pay or terms and conditions.

Control test – the lawful right to command:

● She/he was required to complete training with the previous operator who taught her/him how to use the processing plant for a period of X weeks.

● She/he is required to have the processing plant operating by early morning six days a week. However, her/his finishing times are dependent on the work load.

● She/he is not required to attend meetings within the Payer’s business or with their clients.

● She/he is not entitled to paid breaks.

● The Payer does not schedule her/his assigned responsibilities.

● She/he is required to perform her/his assigned responsibilities at the Payer’s premises.

● She/he is supervised in the work she/he performs as the Payer telephones regularly to check up on her/him and she/he is required to give the Payer a docket book every week which evidences the amount of work she/he has completed.

● She/he cannot refuse to complete an assigned responsibility.

● She/he is required to give prior notice to the Payer and obtain their permission before taking any time off. However, she/he has to take the month of XYZ off every year as the Payer stops all processing operations during this period to take holidays.

Integration Test – did the worker/payee work for themselves or in the business of the principal/payer:

● She/he does not advertise her/his services during the period she/he works for the Payer.

● She/he does not provide her/his services to other individuals or businesses independently of the Payer.

● She/he works alone.

● She/he is not required to train, supervise or assess the work of other workers in the Payer’s business.

● He was provided with work shirts promoting the Payer’s name or logo. However, he is not required to wear them.

● She/he does not have any items promoting her/his own business or services.

● The Payer does advertise on their assets, equipment and tools used by her/him by having their business name on the main processing plant they own.

● She/he does not advertise her/his business on any of the assets, equipment and tools she/he uses.

Results Test – was the worker/payee paid to achieve a specified result:

● She/he is not required to submit any quotes, invoices or any other type of document to the Payer rather she/he is paid a set amount for every tonne that she/he processes through the processing plant which is recorded in the Payer’s docket books. The docket books are then sent to the Payer and she/he is paid via PAYG.

● She/he does not negotiate her/his own fees for the assigned responsibilities she/he completes as her/his fees are set by the Payer. Her/his rate of pay changed when the Payer occasionally increased the price paid per tonne.

● Her/his payment is not dependent on the completion of her/his assigned responsibilities.

● She/he is paid directly into her/his bank account.

● She/he does receive superannuation guarantee contributions.

Delegation/Substitution Test – was the worker/payee expected to complete the work personally:

● The Payer did give her/him specific instructions regarding whether she/he is required to complete her/his assigned responsibilities personally. It is common for her/him to have verbal discussions with the Payer about how she/he is operating the processing plant.

● No one arranges for her/his assigned responsibilities to be done if she/he is unwell or goes on holidays.

● She/he can arrange for her/his assigned responsibilities to be completed by another worker in the Payer’s business but not another person engaged by her/him or any other person. In the case of an emergency, she/he can ask the Payer to send another worker to complete her/his assigned responsibilities but she/he has never had to do this.

Risk Test – did the worker/payee bear any commercial risk:

● The Payer is responsible for paying for workers compensation, public liability insurance as well as other types of insurance. Neither she/he nor the Payer pays for any private accident insurance. She/he has never made a claim on any of these policies.

● She/he is not required to guarantee her/his work for a period of time.

● She/he is not required to correct her/his work in her/his own time, pay for the materials used to correct her/his mistakes or pay for breakages.

Provision of tools and equipment - payment of business expenses:

● She/he is not required to supply her/his own assets, equipment or tools.

● The Payer supplies all the materials used for the job.

● The Payer arranges for the delivery of all the materials used for the job.

● She/he is required to wear protective work gear.

● The Payer only provided safety glasses for her/him to use. She/he mainly supplies her/his own protective work gear.

Other information:

● She/he has always had PAYG amounts withheld from her/his pay and received superannuation guarantee contributions.

● She/he receives a payment summary each income year from the Payer and her/his tax file number declaration states that she/he is a casual employee.

● She/he has never had to supply an Australian Business Number or submit an invoice for payment to the Payer.

General information:

● She/he is a processing plant operator for the Payer.

● She/he is required to take customer bookings for seed cleaning appointments, operate the processing plant to customer satisfaction, keep the processing plant clean between loads and varieties, identify any problems with the processing plant and provide customer service.

Terms and circumstances - formation of the contract:

● She/he was engaged by the Payer through word of mouth.

● She/he did not enter into a written agreement with the Payer but rather she/he verbally applied for the job. When she/he was told she/he was successful she/he received five days of training at the start of the season.

● She/he is not able to renegotiate her/his rate of pay or terms and conditions.

Control Test – the lawful right to command:

● She/he was required to complete five days of training with the previous operator of the processing plant.

● She/he is required to operate the processing plant on demand which requires starting early six days a week. However, her/his finishing times are dependent on the work load.

● She/he is not required to attend meetings within the Payer’s business or with their clients.

● She/he is not entitled to paid breaks.

● The Payer does not schedule her/his assigned responsibilities.

● She/he is required to perform her/his assigned responsibilities at the Payer’s premises.

● She/he is supervised as she/he regularly provides docket books which monitor her/his performance and is required to discuss any issues concerning the operation of the processing plant as well as any other problems with the Payer.

● She/he cannot refuse to complete an assigned responsibility.

● She/he is required to give prior notice to the Payer and obtain their permission before taking any time off.

Integration Test – did the worker/payee work for themselves or in the business of the principal/payer:

● She/he does not advertise her/his services during the period she/he works for the Payer.

● She/he cannot provide her/his services to other individuals or businesses independently of the Payer.

● She/he works alone.

● She/he is not required to train, supervise or assess the work of other workers in the Payer’s business.

● She/he was provided with work shirts as well as cards to give to customers for their bookings that promoted the Payer’s name.

● She/he does not have any items promoting her/his own business or services.

● The Payer does advertise on their assets, equipment and tools used by her/him by having their business name on the main processing plant which they own. Any other advertising is the responsibility of the Payer.

● She/he does not advertise her/his business on any of the assets, equipment and tools she/he uses.

Results Test – was the worker/payee paid to achieve a specified result:

● She/he does not submit any quotes, invoices or any other type of document to the Payer rather she/he is paid a set amount for every tonne that is processed by her/him through the processing plant. This is recorded in the Payer’s docket books that are then sent to the Payer. She/he is paid via PAYG.

● She/he cannot negotiate her/his own fees for the assigned responsibilities she/he completes as the fees are set by the Payer.

● Her/his rate of pay did increase X years ago.

● Her/his payment is not dependent on the completion of her/his assigned responsibilities.

● She/he is paid directly into her/his bank account.

● She/he does receive superannuation guarantee contributions.

Delegation/Substitution Test – was the worker/payee expected to complete the work personally:

● The Payer has verbally given her/him specific instructions that she/he is required to complete her/his assigned responsibilities personally.

● The Payer is responsible for arranging for her/his assigned responsibilities to be done if she/he is unwell or on holidays.

● She/he can arrange for her/his assigned responsibilities to be completed by another worker in the Payer’s business but not another person engaged by her/him or any other person. If she/he is injured or sick, she/he can ask the Payer to send a replacement worker to complete her/his assigned responsibilities.

Risk Test – did the worker/payee bear any commercial or personal risk:

● The Payer is responsible for paying for workers compensation, public liability insurance as well as other types of insurance. Neither she/he nor the Payer pays for any private accident insurance. She/he has never made a claim on any of these policies.

● She/he is not required to guarantee her/his work for a period of time.

● She/he is not required to correct her/his work in her/his own time, pay for the materials used to correct her/his mistakes or pay for breakages.

Provision of tools and equipment - payment of business expenses:

● She/he is not required to supply her/his own assets, equipment or tools.

● The Payer supplies all the materials used for the job.

● The Payer arranges for the delivery of all the materials used for the job.

● She/he is required to wear protective work gear. Ear plugs and dust masks were supplied by the Payer.

Other information:

● She/he has always had PAYG amounts withheld from her/his pay and received superannuation guarantee contributions.

● She/he has never had to supply an Australian Business Number or submit an invoice for payment to the Payer.

We received evidence from the Payer confirming all pay rises that have occurred since 19XX (with the exception of 20XY) and were also advised that:

● The workers have discretion regarding the actual times worked.

● A replacement worker would only be sent if the workers had a long term absence due to illness.

● One of the workers may have employed an office cleaner.

● There would not be an issue if the workers delegated their assigned responsibilities to another person provided they were suitably qualified.

We received evidence from one of the workers confirming the pay rises she/he had received. The information from the worker also advised that she/he has never delegated her/his assigned responsibilities to another person, would need consent from the Payer before delegating her/his assigned responsibilities to another person and would have to contact the Payer to send a replacement worker if she/he was unwell or injured.

We received payslips as well as further information from one of the workers which advised that:

● She/he has never delegated her/his assigned responsibilities to another person as this would require approval from the Payer.

● She/he has never operated with an Australian Business Number.

● She/he has not taken time off but if she/he was unwell she/he would need to contact the Payer to send a replacement worker or reschedule her/his assigned responsibilities.

● She/he may have received a pay rise.

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 common law employees of the Payer for the purposes of the SGAA. Therefore, there is an obligation to pay superannuation guarantee contributions on behalf of them.

Detailed reasoning

The SGAA requires 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 (SGC).

While the term ‘employee’ is defined in section 12 of the SGAA to include common law employees, it also extends to workers who are engaged under a contract wholly or principally for their labour. This employment relationship is often referred to as a ‘contract of service’. This relationship is distinguished in Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee: who is an employee? (SGR 2005/1) from a ‘contract for services’ which is typically a principal/independent contractor relationship that does not attract superannuation guarantee obligations.

It is necessary to consider whether a common law relationship of employer/employee exists between the parties. If the common law tests are not met or are inconclusive, then the extended definition of an ‘employee’ in subsection 12(3) of the SGAA must be considered. If a worker is not an employee under subsections 12(1) or 12(3) of the SGAA, then their status is an independent contractor and no superannuation guarantee obligation arises.

The task of defining the characteristics of a contract of service (the employment relationship) has been the subject of much judicial consideration. As a result, some general tests have been developed by the courts to assist in the determination of the nature of the relationship. However, defining the actual contractual relationship between the parties can be difficult and depends on the facts of each case.

Accordingly, it is necessary to determine the true nature of the whole relationship between the Payer and the workers as to whether a common law employer/employee relationship exists or whether the extended definition of an employee under subsection 12(3) of the SGAA must also be considered.

Common law employee

In deciding whether a worker is a common law employee, there are a number of common law factors to consider. These factors are discussed below.

Terms and circumstances of the formation of the contract

The fundamental task with respect to the terms of engagement test is to determine the nature of the contract between the parties. We must consider whether the contract is written or verbal and whether the terms and conditions of the contract are expressed or implied. These factors are important in characterising the relationship between the parties.

When considering the intentions of the parties in forming the contract, it must be determined what each party could reasonably conclude from the actions of the other. Simply defining someone as an independent contractor does not necessarily lead to the conclusion that the worker is providing the services as part of operating their own independent business.

Control

The extent to which the engaging entity has the right to control the manner in which the work is performed is the classic test for determining the nature of a working relationship. A common law employee is told not only what work is to be done, but how and where it is to be done. With the increasing usage of skilled labour and the consequential reduction in supervisory functions, the importance of control lies not so much in its actual exercise, but in the right of the employer to exercise it.

Even though the modern approach to defining the contractual relationship is to have regard to the totality of the relationship between the parties, control is still an important factor to be considered. This was recognised by Wilson and Dawson JJ in Stevens v. Brodribb (1986) 160 CLR 16 at 36, where they state:

In many, if not most cases, it is still appropriate to apply the control test in the first instance because it remains the surest guide to whether a person is contracting independently or serving as an employee.

Does the worker operate on his or her own account or in the business of the payer?

If the worker’s services are an integral and essential part of the business that engages them (under a contract of service), they are considered by the courts to be a common law employee. If the worker is providing services as an individual carrying on their own business (under a contract for services), they are an independent contractor. It is necessary to keep in mind the distinction between a worker operating their own business and a worker operating in the business of the payer.

The professional skills involved in carrying out the work are also a useful guide in determining whether a worker is carrying on their own business or not. The provision of professional skills or skilled labour may imply that the worker is able to make an independent career by selling that skill. In the case of a contractor with an independent career, it may be implied that the contractor is able to conduct their own business using those skills.

Consideration may also be given to whether the worker could be expected to generate goodwill in their own right.

‘Results’ contracts

The meaning of the phrase ‘producing a result’ means the performance of a service by one party for another where the first mentioned party is free to employ their own means (that is, third party labour, plant and equipment) to achieve the contractually specified outcome. The essence of the contract has to be to achieve a result and not to do work.

Satisfactory completion of the specified services is the result for which the parties have bargained. That is, a payment becomes payable when, and only when, the contractual conditions have been fulfilled. However, payment to achieve a result is not necessarily inconsistent with a contract of service where it is the natural means to renumerate an employee given the situation.

Whether the work can be delegated or subcontracted

The right to delegate or subcontract (in the sense of the capacity to engage others to do the work) is a significant factor in deciding whether a worker is an employee or an independent contractor. If a worker is contractually required to personally perform the work, this is an indication that the worker is an employee.

When an employee asks a colleague to take an additional shift or responsibility, the employee is not responsible for paying that replacement worker; rather the employee has merely substituted or shared the workload.

However, a clause in the contract may permit the worker to delegate the task to another worker subject to approval of the principal, as the principal may not want an unknown worker to be working on their site or who may not be suitably qualified.

Therefore, under a contract for services, the emphasis is on the performance of the agreed services (achievement of the 'result'). Unless the contract expressly requires the service provider to personally perform the contracted services, the contractor is free to arrange for his or her employees to perform all or some of the work or may subcontract all or some of the work to another service provider.

Risk

Generally speaking, employers are vicariously liable for negligence and injury caused by their employees, whereas a principal will not be liable for negligence or injury caused by an independent contractor.

Another consideration of risk is the liability for the cost of rectifying faulty work. That is, the key underlying consideration is whether the worker is exposed to commercial risk in terms of a liability to cover the cost of rectifying defective work.

This is consistent with the focus on the chance of profit and the risk of loss as a traditional indicator that a worker is an independent contractor conducting their own business.

Provision of tools and equipment and payment of business expenses

A worker who has been integrated as an employee into the business is more likely to be provided with the tools and equipment required to complete their work by the employer. Furthermore, the employer is often also responsible for the business expenses incurred by the worker, since the worker has been integrated into the employer’s business.

Independent contractors carrying on their own business often provide and pay for their own assets, tools, equipment, maintenance costs and other expenses. Usually, they will have factored these costs in their overall fee or they will seek separate payment for such expenses from the principal.

In your case

The workers were engaged by the Payer through word of mouth. There is no written agreement between them and the Payer.

They were engaged to operate the processing plants owned by the Payer. Their assigned responsibilities include setting up, using and supervising the grading and pickling of seed to ensure no mistakes or faults are made, cleaning the processing plants to ensure no cross-contamination in-between loads, maintaining the processing plants by repairing any minor faults, reporting major faults to the Payer, taking bookings, completing paperwork, maintaining good storage of grain seconds and organising their transport offsite in a timely manner. They are prevented from accruing any form of leave and are unable to renegotiate their rate of pay with the Payer.

The fact that they were engaged through word of mouth and that there is no written agreement between them and the Payer does not confirm if either an employer/employee relationship or a principal/independent contractor relationship exists between the parties. The fact that the workers are unable to renegotiate their rate of pay is indicative of an employer/employee relationship existing between the parties whereas their inability to accrue any form of leave may be indicative of a principal/independent contractor relationship existing between the parties.

The workers are required to complete their assigned responsibilities at the fixed location of the processing plants owned by the Payer. They were initially provided with training to complete their assigned responsibilities which included demonstrations, verbal training and supervision of work. They are now able to choose their own hours of work based on the bookings made as the Payer does not schedule their assigned responsibilities for them. They regularly work six days a week with their finishing times dependent upon demand. They are not entitled to paid breaks, cannot refuse to complete an assigned responsibility, are not required to attend meetings on behalf of the Payer but must provide prior notice before taking any time off.

Although the quality of their work is not continuously supervised by the Payer, their performance is monitored through the completion of docket books and regular telephone conversations. The Payer also resolves any disputes if either of the workers cannot directly remedy them.

The fact that they are required to complete their assigned responsibilities at the fixed location of the Payer, must provide prior notice to the Payer before taking any time off and cannot refuse to complete an assigned responsibility indicates that an employer/employee relationship exists between the parties. Moreover, the fact that they were initially provided with training from the Payer, any disputes are referred to the Payer if they cannot be directly remedied by them and their performance is monitored through the completion of docket books and regular telephone conversations further indicates that an employer/employee relationship exists between the parties. Although the workers have flexible working conditions and are able to schedule their own hours of work based on the bookings made, this fact does not negate the existence of an employer/employee relationship existing between the parties. Furthermore, the fact that they are not entitled to paid breaks and do not attend meetings on behalf of the Payer is of little consequence in confirming the actual relationship between the parties.

Although the workers do have Australian Business Numbers, little evidence was supplied regarding the services they provide. However, their Australian Business Numbers have not been provided to the Payer. The workers also do not submit invoices to the Payer but rather are given payslips which confirm that they are paid on a piecemeal basis per tonne graded, have PAYG amounts withheld from their pay and receive superannuation guarantee contributions.

The fact that the workers have Australian Business Numbers does not confirm the actual relationship between the parties. Moreover, the fact that they are paid on a piecemeal basis per tonne graded is a natural way to renumerate them given their assigned responsibilities and indicates that an employer/employee relationship exists between the parties. Furthermore, the fact that they are not required to submit invoices to the Payer but are given payslips with PAYG amounts withheld from their pay and receive superannuation guarantee contributions also indicates that an employer/employee relationship exists between the parties.

As there is no written contract between the Payer and the workers, their right to delegate their assigned responsibilities to another person has remained unclear. The Payer has not provided the workers with any specific instructions advising them that their assigned responsibilities must be completed personally and is not opposed to either of them delegating their assigned responsibilities to another person provided they are suitably qualified. The Payer will provide a replacement worker if either of the workers have an extended period of leave. Although the Payer has claimed that delegation has occurred in practice, this has remained unsubstantiated.

The workers both have understood from various telephone conversations with the Payer that they are required to obtain approval before delegating their assigned responsibilities to another person and that a replacement worker will be provided if they are unwell, injured or in the case of an emergency. Their payslips also do not refer to work completed by another person.

The fact that a replacement worker will be provided if either of the workers have an extended period of leave or are unwell, injured or there is an emergency indicates that an employer/employee relationship exists between the parties. Although the workers may have a qualified right to delegate or even an unlimited right to delegate (as the Payer is not opposed to either of them delegating their assigned responsibilities to another person provided they are suitably qualified), the mere right to delegate in the absence of the likelihood or actuality of delegation occurring is of little consequence.

The processing plants owned by the Payer are valued at approximately $X each. The Payer is also responsible for paying for public liability insurance, plant and building insurance as well as workers compensation for the workers. However, to date no claims have been made against the Payer’s workers compensation policy.

The Payer does not reimburse the workers for any holiday pay, sick pay, training or other similar expenses (such as petrol, tools, materials, stationary or telephone costs) and they also do not receive car, tool, travel or away from home allowance. The workers are also not required to pay for any materials used to correct their work, pay for any breakages or guarantee the quality of the work produced. They do not need to provide their own assets, equipment or tools to complete their assigned responsibilities but have supplied their own protective gear on occasion to supplement that provided by the Payer.

The fact that the Payer owns the processing plants and pays for public liability insurance, plant and building insurance as well as workers compensation for the workers indicates that an employer/employee relationship exists between the parties. Moreover, the fact that the workers are not required to pay for any materials used to correct their work, pay for any breakages and predominately are not required to provide their own assets, equipment or tools to complete their assigned responsibilities also indicates that an employer/employee relationship exists between the parties. The fact that they are not required to guarantee the quality of their work, are not reimbursed for any holiday pay, sick pay, training or other similar expenses and do not receive car, tool, travel or away from home allowance is simply due to their seasonal arrangement, flexible working conditions and the nature of their assigned responsibilities.

Given the totality of the relationship between the Payer and the workers, it is evident that an employer/employee relationship exists between the parties.

Our conclusion regarding the common law definition of an employee

With respect to the relationship between the parties, the facts and evidence provided point to the conclusion that the workers are common law employees of the Payer.

Extended definition of an employee for SGAA purposes

The extended definition of an employee within subsection 12(3) of the SGAA 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 a worker is considered to be an 'employee' under section 12 of the 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 person is remunerated (either wholly or principally) for their personal labour and skills;

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

● the person is not paid to achieve a result

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

As the workers are considered common law employees of the Payer it is not necessary to consider the extended definition of an employee contained within subsection 12(3) of the SGAA.