SHORTLIST: White-collar recruiters on notice about contractor risks

White-collar recruiters on notice about contractor risks

Professional services recruiters are being urged to take the recent changes to workplace laws more seriously to avoid the risk of employee entitlement claims from the talent they have engaged as contractors.

Regarding the raft of amendments that started in August, it appears professional services recruiters are less aware than their labour-hire counterparts of how the new definition of employee might impact them, says Raj Sesha, co-founder of contract management and payroll services firm SDP Solutions…

If all recruiters don’t assess and adapt their contractor engagement approaches, they now face a much higher risk of being the deemed the ‘employer of an aggrieved worker, he warns. Raj Sesha, SDP Solutions Unlike under the previous legislation, when the contract wording was the key factor, “the totality of the relationship is what we need to use to determine the employment relationship,” Sesha tells Shortlist.

“My recommendation is for recruitment companies to use some sort of a checklist or workflow to put the person through, to determine whether they satisfy the contracting provisions or the employee provisions.” The Fair Work Ombudsman website features information on the new definitions and which tests to apply.

Independence is key

The wording of contracts Is still important, and these should very clearly state that the contractor can work independently, says Sesha. “They can choose the methodology, they can choose their own ways of doing it.  “The client would give some level of guidance and instruction on what they want to achieve. But the worker should have the full freedom to provide services in a very professional way. The contract should definitely have the option to potentially engage subcontractors as well.” But “what clients tend to say is, ‘| want a contractor, but then | want them to behave like an employee’,” Sesha notes.

For example, “the client might want the contractor to sign emails using the client company logo”, he says. “We generally
don’t recommend things like that.”

Opting out

Under the new laws, contractors who earn above the high-income threshold of $175k can “opt out” of the whole of relationship test, Sesha notes. SDP Solutions has calculated a “ballpark” figure, and advises, “if your workers are going to get paid more than $820 {per day], you should consider the opt-out clause”, he says. Still, recruiters need to keep in mind that it is the worker who opts out — and they can revoke that decision at any time by giving notice in writing. The risk is also lower if the contractor has their own company which contracts with the recruitment agency, says Sesha.

But “it doesn’t eliminate risk”.

Overall, he thinks the courts will have a role to play in reminding recruiters about the risks they run without a change to their processes. “The law is yet to be tested,” he said. “| think we will see some cases out of this. Hopefully that will alert a number of recruitment companies to change the way they do things.”