Hiring independent contractors

Independent contractors are staff that have been hired to provide services or specialised skills and expertise that are not readily capable of being provided by existing employees.

Making the right choice between engaging an independent contractor and an employee is important. Incorrect choices can cause significant reputational and financial risk to the University.

As a general rule, an individual operating as an independent contractor will operate independently of the University and will be engaged for the provision of a specific deliverable. They would not be expected to undertake work that is normally undertaken by employees in association with core activities and they would generally advertise and offer their services to a range of other organisations, operating as a business with an ABN.

Comparison of characteristics of independent contractor vs employee

Independent contractor	Employee
1. Results based - Operates independently of the core activities of the University and will be engaged for the provision of a specific agreed deliverable. Work is not provided in the same way as it would by an employee. Example:  a contractor is engaged to cut down and safely remove a tree from the University premises, an administrative or management related project, or a specialised service not able to be performed by existing staff.	Performs work that is normally undertaken in association with core activities of the University. Example: Where teaching services provided by an individual form part of the core activities associated with a topic (eg normal lectures and tutorials for which the University provides set rates of pay in accordance with its Enterprise Agreement) an employment relationship is appropriate, and payment must be made through the payroll system, with associated tax deducted, superannuation guarantee (if applicable) and payment of payroll tax.
2. Freedom to delegate work to employees of the contractor or to other competent persons. It is advisable that the Services Agreement provides for unfettered freedom to delegate.	Employee may have some power to delegate certain duties to other employees in the University, but they have no inherent right to delegate their work to others (eg outside the organisation).
3. High degree of flexibility in relation to how and when work is to be performed, even if the contract contains specific terms regarding the use of materials and methods of performance	Employee accepts direction from the University in relation to the manner in which work is to be performed and the times and locations at which work is to be performed. In the above example it would be difficult to demonstrate that the individual has discretion as to when and how to perform the work, where lectures and tutorials are pre-scheduled as part of normal topic offerings.
4. Fee negotiated in advance and payment upon completion of the agreed deliverables. A fee should not be based upon University set rates of pay (ie casual hourly rates or similar). Progress payments may be applicable for longer projects.	Paid on a regular and systematic basis for the work (eg weekly, fortnightly, monthly). The University is paying the individual for the supply of their labour, in order to contribute to the achievement of results for the University.
5. Use their own materials, tools and equipment and normally responsible for all ancillary expenses (eg travel and communication expenses)	University provides the employee with the necessary materials and equipment. Any use of the employee’s own equipment or materials is compensated by an allowance or reimbursement.
6. Bear any risk associated with their work and will be responsible for rectifying any faulty or defective work without further payment. Accordingly, an independent contractor is expected to have appropriate insurance. In examining the level and type of insurance that an independent contractor has, the University may need to assess the risk of engaging an individual, particularly where insufficient coverage may leave the University itself more open to risk. The level of actual risk may of course depend upon the nature of the service being provided.	Commercial risk is borne by the University in respect of work performed by the individual. The organisation also takes responsibility for loss associated with faulty or defective work by the individual.
7. Free to advertise and provide services to other businesses and organisations and to accept and refuse work accordingly	Publicly identified as being part of the University (eg having an internal email account, having a staff identification card, being formally identified in corporate publications, wearing uniform)

As a guide, should five or more of the independent contractor characteristics from Table 1, be clearly present, including 1 (Results Based) and 2 (Freedom to Delegate), it might be reasonable to conclude that an independent contractor relationship will be appropriate. If less than four of these characteristics appear to be present, the intended relationship might be more indicative of an employment contract. Advice should be sought from People and Culture Client Services if an independent contractor engagement is still preferred.