Appearing in IN PRACTICE magazine, April 2020
Nearly three-quarters of small and mid-sized accounting practices use flexible working arrangements, according to the recent CPA study My Firm, My Future*. Remote working is common, which can mean giving employees the option to work some or all of the time from home, employing individuals to work for a fixed period from home, or using independent contractors, especially to cope with busy periods or special projects. Such arrangements can be good for both the practice and the workers but company principals should be aware of the legal issues and the management pitfalls.
“The basic distinction between an employee and a contractor is that an employee is hired to work, usually exclusively, by one business,” says Nicola McMahon, Senior Associate in the Employment Relations and Safety team at McCullough Robertson Lawyers. “They are paid a wage, after PAYG deductions, and receive entitlements, such as annual leave and personal leave. Independent contractors work for themselves and sell their services or expertise to one or more businesses. They are paid an agreed rate without PAYG deductions although may charge GST. They do not have paid leave entitlements.”
But there is no definitive test, and sometimes legal advice might be needed. This is important because there have been cases where a business has engaged contractors, but those individuals later argued that they were, in practice, employees, and have brought claims for unfair dismissal or unpaid entitlements. Also, the ATO may determine that an employer should have deducted PAYG tax for someone they have treated as a contractor, when they were an employee.
“There are also serious consequences for contravening the ‘sham contracting’ provisions of the Fair Work Act 2009 where an employer is found to have disguised the relationship,” McMahon notes. “There are stiff penalties if this behaviour is found to have occurred.”
Dr Jim Stanford, Director of the Centre for Future Work at the Australia Institute, likewise emphasises that employers should be aware of their responsibilities.
“Some employers might plead ignorance about their responsibilities when it comes to remote workers, but ignorance is no excuse,” he says. “Whether you are talking about employees or contractors, employers have an obligation to know and abide by the legal standards of the relationship.”
An important step is to have a clear policy on remote working. Some large firms have policy documents but many small and mid-sized firms make it up as they go along, case by case. A written policy provides certainty as well as legal clarity to both sides. It also requires managers to consider whether remote working is really appropriate for the company and the work.
“With remote working, employers benefit from not having to provide office space and technology,” Stanford says. “They may experience less absenteeism, and they may find they are able to recruit labour at a lower cost, since the workers will take into account that they don’t have to commute to work in weighing the appeal of the wage offer. On the other hand, employers don’t have clear oversight or direct control over the worker’s activity and effort. That can undermine observed productivity and the cohesiveness of the work.
“Some remote workers may enjoy the convenience of avoiding travel time and being able to work in more flexible time blocks. The downside is the possibility that work expands to take up larger and larger portions of their overall life. Their work is embedded in their homes, which can become very oppressive.”
Ultimately, if an employer wants someone – whether employee or contractor – who works effectively, meets deadlines, and delivers according to the brief, it is in the employer’s interest to invest time and energy in building a positive relationship.
As a part of this, employers who engage home-based employees should also be aware of the OHS issues. They need to ensure that employees working remotely have a safe work environment and are provided with appropriate tools to do their job, which may include IT equipment, desks, and chairs. Essentially, the OHS requirements are the same as if the employee was in the office.
“Companies should regularly contact employees who work remotely to check their mental health and satisfaction,” advises McMahon. “Working from home has its benefits but it can be socially isolating.”
To access a copy of this report go to https://www.cpaaustralia.com.au/public-practice/managing-your-practice/my-firm-my-future