Pilots - Contractors?

[Wing Root]

I am slightly concerned about what is happening with regard to pilots being "employed" under a contract basis.

I quote from the government's "Wage Net" website and I encourage those contracting their services as a pilot to answer these questions:


Certain business and administrative actions that an employer must effect are significantly dependant on whether a person is an employee or independent contractor. These actions include making PAYG tax deductions, superannuation payments and satisfying certain award obligations.
Is the worker paid a wage or salary?
Is the work performed at the employer’s place of business?
Does the worker work regular or defined hours?
Is the worker engaged to produce a certain result, the completion of which will terminate their relationship with the employer, at least for the time being?
Does the worker provide their own plant or equipment as a means of accomplishing their work?
Does the worker have the right to sub-contract their work?
Is the worker subject to detailed or direct control or could the employer subject them to such control if they chose to?The person is likely to be an employee if you answered 'yes' to questions 1, 2, 3 and 7, and answered 'no' to 4, 5 and 6.
Sometimes, the answers to 4, 5 and 6 may be "yes" and the person could still an employee.
If the answer to question 7 is "yes", the worker is most likely to be an employee.
I'd suggest that anyone being paid as a pilot fits firmly into the employee description yet how can it be that there are so many being paid as a contractor?
Is it that the minimum $45 per flying hour casual GA Award rate is just too much for most employers?

In the following situations what would happen as a flying instructor contracted to provide that service versus being employed to do so.
As part of your duties as instructor while refuelling an aircraft you splash fuel in your eyes requiring medical treatment.
As pilot in command of an aircraft during a training sequence you are involved in a landing accident involving extensive damage to the aircraft and you and your student suffer serious injuries. Your student then sues for ongoing medical treatment, loss of income etc.I have no idea as to how to answer these questions. Let's say you are covered by health insurance but the provider finds out that the injuries were sustained as a result of work. They inform you "This is a matter for Work Cover." The employee instructor should have no problem - where does the contractor stand?

[scrambler]

I would suggest that as a contractor you would be required to cover your own workers comp insurance and super as a minimum. If you are a contractor and fail to cover your own super and workers comp I would suggest you may be in breach of the law. I haven't looked it up so someone may want to do that. Not sure how the insurance for passengers works. What are pilots getting paid as "contractors"? If I were in that situation I would demand that I was getting enough to cover the award casual rate plus super & insurance. Of course I wouldn't get the job because someone else would be willing to work for peanuts.

[Rate1]

It is very timely this subject is brought up. Lets once and for all try to help everyone caught in this situation. Surely we must have accountants and legal eagles involved in aviation visiting this site who can give us the whys and wherefors of who is a contractor and who is not. Where do contractors stand legally in regards to workers comp, super, when to charge GST on their services and award rates of pay. Are instructors being shafted and are there any legal precedents being set from court action in the past. Very confusing!

[zepthiir]

It is also interesting to note that according to the tax office if you earn over a certain percentage of your income(not sure of the exact amount but i think its 50%) from one company then you are classified as an employee of that company.

Not quite sure how that relates to requirements for super, work cover etc but if any legal eagles know the answer please let us know.

[Di_Vosh]

At present, I'm still an I.T. Contractor, so I can only speak from an I.T. perspective, but some of this should be relevant to anyone wanting to be a Contractor Pilot.

To contract, you should have a limited liability company. These are not absolutely necessary, but a lot of I.T. clients wont employ you without one. These cost around $1000.00 to set up.

As a contractor, I pay my own Super, and pay my own Workcare. Contractors don't get sick pay, annual leave, and don't get paid lunch, christmas parties, public holidays etc. (I'm aware that these are moot issues for a lot of pilots anyway).

To compensate for this, my charge out rate worked out that I would get paid about 2/3 more than a permanent employee. That is, if a permanent had an annual salary of $70,000.00 my charge out rate would have me earning around $110,000.00 for about the same hours per year.

[This (for the employer) was in the long term much cheaper than a permanent employee, as the TEC (Total Employment Cost) for a $70,000.00 employee is variously calculated anywhere between $120,000.00 and $150,000.00.]

What all this means is that, if you want to be a Contractor Pilot, your hourly rate should be around 50% more than what a permanent or "Casual" would earn. This is to compensate you for having to pay Super, Workcare, etc.

I wouldn't be a Contractor Pilot without a VERY CLEAR demarcation on Workcover written into the contract. It must be CLEARLY WRITTEN whether you're provided cover by the employer or have to provide your own. I arrived at my "50% more" hourly rate based on what I pay workcover as an I.T. contractor. This figure would probably have to be revised as I'd be guessing that premiums for pilots would be higher than for office workers.

Lastly, the point that Zepthiir made is more to do with how you berak up your company earnings come tax time.

CLERP VI (I think it was called) was an ATO ruling based on the 80:20 rule. If you worked more than 80% of you time at one client, you were "deemed" an employee. What this means is that you cannot pay yourself a nominal figure for the year and have the Company earn the rest (Company tax is only 36%). You have to pay tax as if the company earnings were your own.

To summarise (IMHO):

Unless you've got:
1. Your own company (with ABN)
2. Your own workcover
3. Your own super
4. An hourly rate that covers the above AND pays you a healthy margin over the award

DON'T WORK AS A CONTRACTOR PILOT.


My 2c, and hope it helps.


DIVOSH!

P.S. And this is WITHOUT going through all the hassle of Quarterly BAS statements, accountants fees (unless you can do that, too) and about 1000 ATO junk mails per year :ooh:

[Woomera]

This subject has previously been done to death on PPRuNe - read by all, the advise ignored by most.

If there are any true "contractor pilots" in accordance with Australian tax and industrial law, it would be no more than a mere hand full - if that! A pilot for example, who ferries various aircraft in the private category, for numerous individual owners, may be deemed a "contract pilot".

Those employed regularly (or even irregularly) by one operator in the GA industry are "casual" or "part time" but are not "contract pilots".

"Casual" and "Part Time" pilots are covered by the relevent Award.

Employers of these "contract pilots" should be reminded their legal obligations go back six years if ever a purported "contract pilot" decides to have a chat with his local Industrial Relations Inspector or Tax Office.

Woomera

[Wing Root]

Thanks for the replies so far everyone.

It seems it's yet another case of the aviation industry being totally the reverse of all other forms of buisness out there. Instead of the contract arrangement providing a higher per hour rate to cover extra costs to the contractor, as a pilot it's an excuse to lower the hourly rate!

[7gcbc]

I'm similar to Di_Vosh, in the sense that I contract IT/Business services to clients, I do pretty much as he said, pay my own workcover, but very often I get the agency to cover PI and payroll tax.

There are contractor pilots, an overseas agency I used to work through in a previous life offer offshore umbrella structures for them, most of these guys are domiciled in the mid east, and it is not a do-able or wise structure to employ here in OZ , because the ATO are really on the ball here, and besides both the "alienation of personal services ruling" and 80/20 rule makes it untenable

Besides, Mid east guys have their awards large and far and above outweigh the slimmest posibility of pimping their trade here or within the EU for longer than 6 months of the year.

[ITCZ]

Fark.

The most amazing thing about this post is that this STILL COMES UP FOR DISCUSSION when it should be a dead issue.

It is like the 'turning downwind and stalling' debate.

There is nothing in it, yet fresh CPLs are STILL asking this question because the cloth eared gits that 'run' the entry level aviation 'businesses' still do not understand the legal environment they operate in, nor their responsibilities as employers.

Allow me to state it once and for all.

Way back in a dingy classroom in what is now UniSA's School of Business, I was a student in Bill H*****'s undergraduate course Australian Industrial Law 1.

The basics. The stuff that all industrial practictioners and most employers know.

It was being delivered by a former Commissioner of the federal Industrial Relations Commission, a man who had his name on some groundbreaking IR cases, not some ivory tower academic.

I will never forget him asking the question in a tutorial covering a case study about some sandwich makers, 'what separates an employment contract from a contractor relationship?'

When half the class pussyfooted around, not understanding the question or not having done their reading for the case study, he was red faced and shouting!

"This is a contract for PERSONAL SERVICES! A contract for a PARTICULAR PERSON to do a job! It is an EMPLOYMENT CONTRACT!!!"

So. This is the stuff you learn in first term of a first year, undergraduate course in Industrial Relations.

The WAGENET excerpt with numbered questions that Wing Root quotes is simply a way of testing whether the relationship is one of contract FOR services or contract OF service, an employment contract.

So, as Woomera says, it is a dead issue.

Any employer that presents you with a 'contract' for flying services is a fool and bordering on a criminal.

They are certainly not 'businessmen.'

I put them in the same category as blokes who spike drinks to get a root.

Answer this: if such 'contracts' were truly a more flexible and effective way of running flying businesses, why the hell do we not see them for QF and VB pilots, why don't senior public servants and mining company executives not have 'contracts for service' rather than employment contracts?

Why not?

Because they are a one way deal that offers none of the benefits that a worker in a first world country could expect.

Professional pilots work under awards, enterprise bargaining agreements, certified agreements, and australian workplace agreements, which offer varying levels of flexibility and protection.

BUT they all have clauses giving the pilot the protection that most Australians believe is their 'right.'

Example as per above.... you are doing circuits at a GAAP aerodrome with an ab initio. You briefed an EFATO, and bugger me, you actually get one today! You pick a UniSA footy field, make a successful landing, wipe out a wingtip and bend the prop and hoe a nice furrow in the number one cricket pitch, but you walk away.

What is to stop the university sports association or your aircraft's insurer to chase you for damages? There goes the next three years of your life in court appearances, legal fees and the rest if you are a contractor, even if you have insurance.

Try this from the Pilots (General Aviation) Award 1988:

A pilot will not be required to pay for damage or loss of aircraft or equipment used in the service nor will any lien or other claim be made by the employer upon the pilot's estate. Any claim made by any member of the public, passenger or other person upon the pilot's estate as a result of any accident or happening caused by the pilot when duly performing their nominated duty, whether efficiently or, as may be subsequently determined, negligently, will be accepted as a claim made against the employer. The employer will be solely responsible for all claims as a result of operations by or travel in their aircraft. The foregoing will not apply to a pilot who knowingly performs their nominated duty in a manner contrary to law or the employer's policy.

And for every other common problem that can occur while you are at work, whether personal, financial or otherwise, there is a clause setting out your rights and responsibilities.

You only see 'contracts' at the entry point, bottom feeding 'employers' that are putting the squeeze on inexperienced and desperate CPL's.

And if you accept one, you put yourself in the same situation as a sweat shop worker making shirts that sell for $100 and only taking $2 each piece.

It is BULLSH!T and you should not be taking it.

There ARE aviation employers that will hire you and pay you wages as an employee.

If you sign a 'contract for services' instead of entering into an employment contract, then you are a fool and you deserve all the headaches that are coming your way.

If you think you are smarter than the millions of Australians that worked under the worlds fairest industrial system for the last 100 years, then fill your boots.

Show us all the 'better' way.

[tinpis]

I put them in the same category as blokes who spike drinks to get a root.

Fair bit of that goin on in Darwhine as well.

[The Voice]

ITCZ

congratulations on a fantastic post .. should be cut out and stickied for all (newby) pilots (and other workers too).



Tinny

had a chuckle at that one buddy! Somethings will NEVER change!! :uhoh: