Blog
01 November 2011
Compliant Workforce Engagement
Quadrant People Solution
Does your existing contractor model eliminate risk, reduce administration, drive performance and deliver sustainable cost savings to your business?
There are many reasons why businesses engage contractors. The most common reasons are:
- the desire for a simple arms’ length engagement structure;
- flexibility within the engagement, such as mutual ‘no cause’ termination provisions, etc.;
- the engagement falls outside industrial law;
- evidence that contractors are more productive and task oriented, requiring less supervision and time off; and
- higher skills retention due to project ownership.
Many businesses will enter into contracting arrangements without the full knowledge or understanding of the factors that impact upon the engagement, potentially to the detriment of both parties. These can be considered in the following way:
- do the contractual terms and substance of the assignment reflect the common law characteristics of an Independent Contractor?
- is the arrangement a Sham Contract (Fair Work Australia Act)?
- is the arrangement fair to both parties (Independent Contractors Act)?
- is the arrangement compliant from a taxation perspective (Personal Services Income (PSI) provisions of the Income Tax Assessment Act)?
Our experience is that most businesses would have difficulty answering these questions.
The ABN myth
It is a common misconception that the provision of an ABN by an individual is sufficient to establish their status as an independent contractor, thereby relieving the business of statutory responsibilities for PAYG tax and superannuation guarantee contributions. On its own, the holding of an ABN simply means that the individual is registered with the ATO for the purposes of collecting and remitting GST.
Specific taxation and superannuation rulings defer to the common law principles for determination of an individual’s status as employee or independent contractor, and those rulings make it quite clear that an ABN is not automatic presumption of contractor status for the purposes of PAYG and SGC.
Are your engagements secure?
If the business merely relies on the provision of an ABN, and is unable to answer the earlier questions with absolute clarity of the criteria that sits behind each, chances are your contract engagements are not providing you with the simplicity of structure they desire, and are more likely to expose one or both parties to statutory liabilities and/or penalties.
How Quadrant Executive can assist
Managing and minimising risk in all workforce engagements is paramount. The Quadrant People Solution (QPS) ensures that engagements with independent contractors are properly structured to meet both common law test of independence and the exemption tests under the PSI provisions of the taxation legislation. QPS includes a detailed assessment of all engagement models to identify, and where possible, reduce or eliminate any exposure.
Our solution provides you with:
- Complete compliance, corporate governance, reporting and risk management with all models, processes and procedures
- Reduced workforce administration and overhead which, depending on your current arrangements, may result in significant, sustainable cost savings
- Greater workforce engagement, motivation and productivity through performance based role and reward structures
- Greater ability to attract and retain skilled professionals through greater salary packaging flexibility, wealth creation and overall financial benefits
- Reduced employee relations and employment risk
Outsourcing the management of your contractors to QPS shifts the risk and compliance to an organisation with the expertise and resources required to handle it. Our workforce engagement structures provide benefits, both tangible and intangible to the business and the contracted individuals.
QPS is unique. Through QPS, Quadrant Executive can deliver your business significant and sustainable cost savings that no other provider can match. Typical net savings of greater than 10% of payroll can be achieved through the elimination of:
- state payroll tax
- state workers compensation
- common law requirements
- superannuation
- industrial relations provisions
- administration costs
If your existing contractor model does not deliver you these benefits, we would like the opportunity to demonstrate how QPS can eliminate your risk, reduce your administration, increase visibility, and achieve significant cost reduction.
See the full WorkPro article: http://www.hcamag.com/newsletter/content/120695/