Are your Contractors really Contractors? Part 2

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In this two-part episode of Get to the Contest Small Business Podcast, I talked to HR expert Kristy Lee Billett of the Your People Powered Business and the People Powered Podcast.
We discussed the key indicators of determining if someone is an employee or a contractor, some of the misconceptions around contractors, the consequences of getting it wrong and how to de-risk your business on this issue.
Contractors are integral in growing a business.
Contractors will allow you to grow your business, turn off and on your capacity as required without necessarily the overhead. With that in mind, it is important to be aware of what is and what isn't included with your agreement with your contractor. Make sure to be clear and document your arrangement.
It’s employee > contractors for the government.
Not to be melodramatic but I want to make a strong point: Government hates contractors. Unlike contractors, employees make it so much easier for the government to collect tax revenue. If people are on salary and wages, it just takes the gray out of it for them and that is why the government loves that. With contractors, the opportunity for evasion via non declaration and income splitting is higher – Hence the governments attitude.
Just because someone says they're a contractor does not make them a contractor.
Be deliberate about how you engage a contractor. What is their business structure? Are they taking orders or do they have control over completion? Who bears the risk? To help you with this, I would strongly recommend that you use the government contractor decision making tool.
How do you de-risk?
There are a lot of ways to de-risk when it comes to contractor engagement. Some are the following (know more in detail on the episode):

1. Don't engage someone who's just a sole trader or partnership.
2. Have specific terms of engagement.
3. Before anything else, know ALL the risks by engaging with an advisor or a trusted accountant. Remember that the risk is all on the employer. If you're the employee or the sub-contractor that's doing the work, very limited can go wrong from you if there's anything that blows up. If you are the business engaging the contractor – you might find you are up for super, leave entitlements, workers compensation , payroll tax and a whole range of other costs.

Document, document, document.
Now, this is something that I'm going to steal from Kristy Lee and apply to our sort of business and our advice to clients. Getting these things documented is so important and the best time to get things documented is upfront when everyone's happy and everyone wants to work together.
If you have a business that involves people, get advice from a professional.
May it be employees, contractors, or people that could be deemed employees, seek professional advice on handling in relation to your business. Consult an HR specialist such as Kristy Lee at Your People Powered Business. Such professional can offer a lot of guidance, templates and direct one-on-one support.
Reach Kristy Lee Billett at Your People Powered Business and The People Powered Podcast. Email me for questions and further inquiries.
Episode references:
ATO Contractor Decision Making Tool Link
Worker or Contractor Tool