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COSBOA Communique – Contractors and the Law

Note: This communique reflects COSBOA’s views and not necessarily the views of all participants at the round table.

Last Thursday (7th of June 2017), the Council of Small Business Organisations of Australia (COSBOA) hosted a stakeholder workshop in Sydney to discuss the operation of contractors in the Australian workplace. The following key points were noted.

1. There is a significant issue associated with the fair operation and regulation of Contractors in the Australian workplace – albeit that this issue is not as ‘cut and dry’ as some commentators suggest. The key dimensions of this issue can be broadly summarised as follows:

a) The current laws/definitions applying to the use of contractors in Australia are not consistent, leading to inconsistent administration by regulators - particularly in respect of Australian Taxation, Workplace and Competition laws.

b) Much of the current debate about contractors is wrongly premised in ideology and fails to grapple with the bona-fide role of contractors in a global workplace – one that is being continually reshaped by disruptive technologies and business models.

c) Any attempt to address the current issues relating to the use of contractors must balance the dual objectives of (i) ensuring fair dealings and, (ii) maintaining the international competitiveness of Australian businesses in the face of continuous market changes.

d) The issue of contractors within the Australian small business sector is likely best considered from two separate dimensions, namely:

(i) small businesses as a purchaser of services from individuals and

(ii) small businesses as a provider of services to larger businesses/organisations.

It appears that much of the current national debate relating to contractors concerns the first dimension, but the second dimension is an issue that is also worthy of review.

e) Notwithstanding the inconsistency of current legislative definitions, there appears to be a low level of understanding of the current laws governing the operation of contractors in Australia – when considered from the perspective of both:

(i) the business engaging the contractor; and,

(ii) the contractor providing the service.

f) The changing nature of work suggests that there are certain groups of the population that actively seek out contract arrangement as a means of balancing their employment and lifestyle choices. While these choices should be respected, it is suggested that higher skilled employees are generally holding several part-time roles by choice. Lower skilled workers (or those located in areas of lower employment demand such as regional areas), on the other hand, are likely only doing so by necessity.

g) There is a primary issue associated with future redress of the inappropriate use of contractors in some industries (e.g. youth employed in the Australian Construction industry). Specifically, the employers of individuals as ‘contractors’ largely sit outside the current regulatory safety net afforded by various Australian governments. As a result, current enforcement practices often unfairly penalise the individual (i.e. loss of employment) with no risk of adverse consequences for the employer.

2. COSBOA believes that the key to resolving this issue requires a comprehensive approach that unites key stakeholders in the simultaneous pursuit of four (4) actions, namely:

a) Developing and applying a consistent definition of a Contractor for the purposes of administering Australian Taxation, Workplace and Competition laws. Such a definition might be premised on a two-part definition that distinguishes between individuals working as contractors and businesses working as contractors (i.e. B2B arrangements)

b) Investigating the merits (or otherwise) of modifying existing laws to ensure that:

(i) the more vulnerable elements of the Australian Labour force – such as low skilled workers and those located in areas of low labour demand – are not exploited; and

(ii) ensuring that businesses do not gain an unfair market advantage over their competitors through the exploitation of contractors.

c) Investigating the opportunities to develop Industry Codes of Conduct (both voluntary and regulatory) to manage observed issues in specific industries where there is a significant risk of exploitation of contractors.

d) Reviewing the role of the ABN and processes for issuance of ABN numbers (practice and not regulation). Within this context, COSBOA notes that the ATO has already embarked on this work and that there is an opportunity for this work to be supported by other key stakeholders.

3. COSBOA notes that this issue is complex and multi-faceted. Accordingly, there is no obvious or immediate ‘fix’. Rather, there will be a need for all stakeholders to park their ideological differences and engage in meaningful dialogue that seeks to address the multi-faceted nature of contractors and the use of same in the Australian workplace.

a) For its part, COSBOA commits to working with all stakeholders to advance improvements. This action includes reaching out across the ideological divide to engage unions in future discussions on this issue.

COSBOA would like to thank all stakeholders who attended the Small Business Contractor Workshop in Sydney last week and looks forward to working cooperatively with all parties to advance solutions that are both proportional and effective.

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