The legal requirements for a Not For Profit in dealing with staff and independent contractors are the same as for any employer. There are some differences between employees and independent contractors and their rights are protected under different Acts.
How do we know if our workers are employees or independent contractors?
The main differences between employees and independent contractors will be to do with how they are paid, what benefits they receive and how they approach the work.
The PilchConnect website maintains information about volunteers, employees and contractors, including the differences between them and legal issues you need to consider.
The ATO Website has detailed information about your responsibilities for volunteers, employees and independent contractors and has information to help you understand the differences between these different types of workers for tax purposes.
Independent contractors – at a glance
- relevant Acts: independent contractors are covered under the Independent Contractors Act 2006 (Cwth) and are also entitled to some general protections under the Fair Work Act 2009 (Cwth) including protection from unlawful discrimination
- the work: an independent contractor is usually responsible for doing a set piece of work or working for an agreed period of time. They will usually decide how they’ll do the work and they generally have the experience and skill to do so without additional training. You should clearly define the work in your agreement with the contractor
- operation and structure: an independent contractor may be operating as a registered business and often will have their own registered business and Australian Business Number (ABN) and may also be doing work for other organisations or businesses. They may accept or refuse additional work, outside the terms of your agreement with them
- payment: you would normally pay an independent contractor for results, e.g. when a project has been delivered or they have completed an agreed number of hours’ work. To avoid misunderstandings and disputes, your agreement with the contractor should clearly state when and on what basis you will pay the contractor
- superannuation and GST: an independent contractor takes care of their own superannuation and GST payments and holds their own insurance policies
- tools and equipment: an independent contractor provides their own tools and the materials and equipment required to complete the work.
Who can help if we have a dispute?
If a dispute arises with an independent contractor and they are performing work as a business entity (e.g. sole trader, company or partnership), you will be able to get help through the Dispute Settlement Centre Victoria, a free dispute resolution service funded by the Victorian Government.
The basis of your arrangement with an independent contractor is the agreement you have with them. The independent contractors page on the business.gov.au website has sample agreements and information about responsibilities, intellectual property, entitlements and resolving disputes.
Under the Independent Contractors Act 2006, a contractor or the organisation can apply to a court for an order to have the contract (or a part of it) revoked or varied on the grounds that it is ‘harsh’ or ‘unfair’. This could happen if the independent contractor believes that he or she is being paid at a rate that is, or is likely to be, less than an employee would get for performing similar work. See the dispute resolution page for independent contractors on the business.gov.au website to see the process you should follow, including information about going to court.
Do we need to do background checks?
When recruiting workers of any sort for your organisation, there may be some legally required background checks, as well as other checks that are recommended as part of the organisation's duty of care. For example, if you have not completed background checks the organisation may be liable for damage incurred by someone working for your organisation.
There are few hard-and-fast rules about background checks. The decision has to be about the risk that applies for your organisation. You should take special care if employees or independent contractors are working with children, the elderly, people with disabilities or if a volunteer will have responsibility for finances or driving a vehicle.
Note: A Working with Children Check is a legal requirement for workers who will have contact with children during the course of their work with your organisation. The Working with Children Check is administered by the Department of Justice (DOJ).
- see the Who needs a check page on the Working with Children Check website.
Find licences, permits and registrations for your NFP using the Australian Business Licence and Information Service (ABLIS)
Resources and tools
Not-for-profit Law - legal differences between employees, volunteers and contractors.