(1) The University often engages the services of individuals who are not employees of the University, including independent contractors (ICs), guest lecturers, teachers, tutors, editors, curriculum developers, research assistants, suppliers and others. (2) This Procedure outlines the process to clearly distinguish between circumstances where it is appropriate and allowable to engage an IC to perform a task rather than an employee to perform that task and ensure that the University meets its obligations in respect of: (3) The consequences of misclassifying workers as ICs instead of employees may cause the University to fail to meet its legal obligations and give rise to significant liability, including taxes and related penalties. The University has adopted this Procedure to guide organisational units seeking to engage ICs and to establish procedures to ensure that individuals are properly classified as employees unless they meet the criteria of a genuine IC. (4) HESF: Standard 6.2 Corporate Monitoring and Accountability. (5) Standards for RTOs (2015): Standard 7 & 8. (6) This Procedure applies to all staff of the University who have the actual or delegated authority to engage individuals to perform any service for the University including those performing work inside or outside Australia in overseas jurisdictions. (7) This Procedure will assist staff to avoid the risks associated with entering into an improper arrangement with an IC. (8) (9) (10) Bona Fide: A true and genuine organisation that can provide a valid ABN or ACN, and is registered for GST with the Australian Taxation Office. (11) Company: Entity that has been incorporated pursuant to the Corporations Act 2001 (Cth) (Cth) and have an ACN and ABN. (12) Control: The right the University will have to direct the way in which the work is to be performed and includes the exercising of judgement as to how, when and where to perform the specific task or tasks. (13) Core Business Service Providers: (14) Employees: Refers to persons engaged by the University to provide personal services for reward. Employees are paid through the payroll system. (15) Independent Contractors: (16) Non-core Business Services Providers: These are, other than employees, independent contractors who are providing services as part of the University’s core business. (17) Non-service Provider: Is an individual, partnership or company that supplies the University with goods only, or goods and services where the value for the goods is more than 80% of the total contract value. (18) Organisational Unit: Includes but not limited to, colleges, schools, departments and branches. (19) Partnership: Is an arrangement between two or more individuals to carry on a business jointly. A partnership is not a company. (20) Past Employee: Is a former Victoria University employee whom was terminated or resigned less than 3 months prior to the proposed engagement as an IC. (21) Remuneration: Is the provision of reward for personal services. It includes, but is not limited to, salaries, wages, allowances, stipends, honorariums and bursaries. (22) Service Provider: Is an individual, partnership or company that supplies to the University services only (non-tangible goods) or goods and services where the value of the services is more than 20% of the total contract value. (23) See Financial Code of Conduct Policy. (24) The decision of engaging an individual worker as an employee, consultant or IC must be determined prior to any engagement undertaking is given and prior to commencing any work. (25) The following service providers are exempted from the application of this Procedure. This means that providers that fall into the categories listed below may be engaged as ICs without further action. (26) Core business services are required for the delivery and support of teaching and learning programs that allows the University to fulfill its objectives. Individuals involved in delivering core business services are employees. The following service providers, who are core business service providers, are specifically identified as employees or are required by law to be treated on the same basis as employees and not ICs: (27) Approval to engage an IC is subject to budget availability and that the work to be undertaken is essential and cannot be performed internally by the existing University staff. (28) Effective management of IC is essential to ensure the objectives of the engagement are met. (29) All appointments of ICs must comply with the University Procurement Policies and Procedures. (30) The University officer in charge of engaging the IC or the Operational Accounting Team must complete the Independent Contractor Questionnaire (ICQ). The Tax Compliance Team will use the information provided on the ICQ to assess and determine if any obligations arise in relation to Superannuation contribution, Payroll Tax and Workers Compensation. (31) The arrangement between the University and the IC must be properly documented by entering into a contract agreement. A copy of the standard contractor agreement can be obtained from the University Legal Services website. These standard agreements are effectively pre-approved by the University Legal Services. Where these templates are used without any amendments no further approval is required from the University Legal Services office. (32) If amendments are required to the terms and conditions of the University standard contractor agreement, the University Legal Services office must draft the amendments, or if the amendments were requested by the contractor, to review the amendments. (33) If the contractor is not willing to use the University’s form of agreement and has supplied their own, the University officer in charge must refer the agreement to University Legal Services for review. (34) Where the final form of the contract has been agreed, the contract agreement must be approved and signed by the Officer who has the financial delegation to commit the University to that level of expenditure. (35) The IC engaged by the University must have been determined to be an IC in accordance with this Procedure and is able to demonstrate that they: (36) The Operational Accounting Team must submit: (37) Organisational units are prohibited from engaging ICs in the following circumstances: (38) The distinction between an employee and an IC lies in the legal responsibilities that attach to the two different contractual situations. If an employment situation exists, then the University is bound by all the usual employer/employee duties and responsibilities, that is leave entitlements, superannuation, withholding of tax, all the implied duties, such as the duty of mutual trust and confidence, and so on. If the relationship is one of principal and IC, then the legal responsibilities are quite different. (39) A close examination of all the relevant facts and circumstances of a case is necessary to distinguish between a true IC and an employee. Typically, the relationship between an employer and an employee is a contractual one which is referred to as a contract of service. The IC on the other hand is usually hired to do a defined task under a contract referred to as a contract for services. It is usually the case that the relationship between the principal and the contractor is intended to come to an end at the completion of the task. The contract usually describes the parties as being independent of each other, and has no provisions for annual leave, sick leave or other statutory entitlements an employer/employee relationship would include. (40) The table below outlines six of the factors that, taken together determine whether a worker is an employee or contractor for tax and superannuation purposes. (41) Some individuals who appear to be contractors can be caught by legislation which deems them to be employees for the purposes of the relevant legislation. (42) The University assesses its obligation to remit superannuation contributions to a complying superannuation fund on behalf of contractors who are deemed to be employees based on the tests provided under the Superannuation Guarantee (Administration) Act 1992 (Cth). Payments to sole trader contractors are considered employees in the Superannuation Guarantee Charge (SGC) context and subject to the SGC when: (43) The ATO ‘Am I entitled to super?’ decision tool can be used to determine whether the University has the obligation to make superannuation contribution on behalf of an IC who is deemed to be an employee for superannuation purposes. (44) The payroll tax contractor provisions are contained in Division 7, of the Payroll Tax Act 2007 (Vic). They are intended for tax payments to contractors who predominantly provide labour services and work exclusively or primarily for one principal in a financial year. Such arrangements are referred to as “relevant contracts”. Payments under these contracts are deemed to be wages (excluding GST) and the employer is liable for payroll tax on those wages. (45) Payments under a relevant contract will be deemed wages and subject to payroll tax under the contractor provisions, unless the contractor satisfies one of the exclusions listed below. (46) Under the Accident Compensation Act 1985 (Vic) (Vic) (AC Act), the University has the obligation to pay workers compensation for ICs if:Financial Code of Conduct - Independent Contractor Procedure
Section 1 - Summary
Section 2 - HESF/ASQA/ESOS Alignment
Section 3 - Scope
Section 4 - Definitions
As a general, but not exclusive, rule, non-core business service providers provide services to organisational units of the University whose primary purpose is to provide administrative, technical and professional support to the educational and teaching units of the University.
Remuneration is paid through the University’s payroll system and is subject to tax and other statutory employment on costs.Section 5 - Policy/Regulation
Section 6 - Procedures
Part A - Summary of Roles and Responsibilities
Roles
Responsibilities
Tax Compliance Team
Ensure that this Procedure complies with the current Employment Laws, ATO Rulings and guidelines that relate to the engagement of ICs.
Conduct regular assessments and where applicable pay superannuation, payroll tax and workers compensation on behalf of contractors who are deemed to be employees for the purposes of the relevant legislation.
Provide regular training to increase the awareness of this Procedure amongst the Finance staff and in particular the Operational Accounting Team, Procurement Hub Officers and the Accounts Payable Team.
All University Staff
Responsible for familiarising themselves with the requirements of this Procedure and responsible for acting in compliance with this Procedure at all times in their conduct as a staff member.
Part B - Procedures
Exceptions
Core Business Service Providers are Employees
Service Providers that may be engaged as Independent Contractors
Payment to Independent Contractors
Prohibited Engagements
Part C - Difference between Independent Contractor and Employee
Feature
Employee
Independent Contractor
Measure of control over the work
The University has the right to direct the way in which the worker does their work.
The worker has the freedom in the way the work is done, subject to the specific terms in any contract or agreement.
Exclusivity
Employee usually works exclusively for the University.
Contractor is free to provide services to multiple clients.
Ability to subcontract/delegate
The worker can’t subcontract/delegate the work, they can’t pay someone else to do the work.
The worker can subcontract/delegate the work, they can pay someone else to do the work.
Basis of payment
The worker is paid either:
• for the time worked;
• a piece per item or activity;
• a commission.The worker is paid for a result achieved based on the quote they provided.
A quote can be calculated using hourly rates or price per item to work out the total cost of the work.
Equipment, tools and other assets
• The University provides all or most of the equipment, tools and other assets required to complete the work; or
• The worker provides all or most of the equipment, tools and other assets required to complete the work, but the University provides them with an allowance or reimburses them for the cost of the equipment, tools and other assets.
• The worker provides all or most of the equipment, tools and other assets required to complete the work.
• The worker does not receive an allowance or reimbursement for the cost of this equipment, tools and other assets.
Commercial risks
The worker takes no commercial risks. The University is legally responsible for the work done by the worker and liable for the cost of rectifying any defect in the work.
The worker takes commercial risks, with the worker being legally responsible for their work and liable for the cost of rectifying any defect in their work.
Independence
The worker is not operating independently of the University business. They work within and are considered part of the University business.
The worker is operating their own business independently of the University business. The worker performs services as specified in their contract or agreement and is free to accept or refuse additional work.
Legislation that deems Individuals to be “Employees”
Superannuation Guarantee Levy
Payroll Tax
The contractor provisions apply regardless of whether the contractor provides services via a company, trust, partnership or as a sole trader.
Workers Compensation
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