Question
I am a subscriber to your excellent magazine.
I have recently become aware that in some circumstances an entity engaging a person to do work as an independent contractor rather than an employee may have to pay SGL to the contractors nominated super fund.
I have not been able to find any clarity on this and the circumstances in which it might apply.
Can you advise me of the circumstances when this may be payable?
I assume the rate would now be 9.5 percent but if not, I would appreciate confirmation of the applicable rate.
I get it that if a worker is in fact an employee and not an independent contractor, even though contracted on that basis, then SGL would be payable by the head contractor as the employer in truth (along with the proper leave entitlements). This would depend on the arrangements being determined to be a sham though I assume.
My concern is that in some circumstance’s SGL may be payable by a head contractor to a person who is in fact properly engaged as an independent contractor arises out of the Fair Work Fact sheet. http://www.fairwork.gov.au/how-we-will-help/templates-and-guides/fact-sheets/rights-and-obligations/independent-contractors-and-employees
Please see the note in para 5 in the independent contractor side of the table. The wording of the note suggests that SGL may be legally payable even though there is a legitimate contractor relationship and no question of a sham arrangement. In support of this interpretation, it does not make the same qualification in terms of leave at the last paragraph in the table.
If this is right, I am keen to ascertain in what circumstances the obligation to pay SGL to a genuine contractor might apply to a head contractor. Presumably, as a starter, only if the contractor engaged is a natural person and not a company or partnership.
I would be pleased to hear your thoughts on this.
Answer
If you engage an independent contractor then the 9.5% statutory superannuation will not be payable.
Typically, such people are paid for a result, not by the hour and are able to determine their hours of work and able to delegate their work.
You hit the nail on the head when you stated “contractor rather than employee” – if the person works under your direction and control, is paid hourly, working stipulated hours and cannot delegate their work then it is very likely statutory superannuation will be payable.
Some general protections provided under the Fair Work Act 2009 extend to independent contractors and their principals.
For more information on workplace rights, industrial activities, and what constitutes adverse action, please see the Protections at work fact sheet. https://www.fairwork.gov.au/how-we-will-help/templates-and-guides/fact-sheets/rights-and-obligations/protections-at-work