"Independant Contractors"
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"Independant Contractors"
With the large amount of new and unemployed instructors around I have heard of flying schools going back to employing instructors as independent contractors. ie. making them pay for their own tax,annual leave,sick leave,super and insurances. I have heard they also have to pay for CFI proficiency checks. Poor hourly rates are being paid for this privelige. From my reading most instructors would not fit the tax dept description of an independent contractor but are essentially employees. Do we have any accountants or legal eagles who can set the record straight on this degrading practice and what we can do about it.
The taxman calls it the 80/20 rule. If you work more than 80% for a single company you can be deemed to be an employee. AND, if you satisfy the taxman...would the CASA then look at you as an operator and therefore requiring an AOC?
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I don't think this has ever stopped. Too many newbies are easily convinced that they have no choice if they want to fly, too many employers have been getting away with it for too long.
who can set the record straight on this degrading practice and what we can do about it.
As to what can we do about it.........well it is clearly the operators who are at fault here, but you can forget trying to get CASA to do anything. My understanding is that their enforcement powers are strictly limited to the CAR's.
Regarding the ATO, well I know of someone in a similar situation who spoke with the ATO, and they treatened to prosecute the taxpayer/employee/contractor, not the operator/employer. Obviously the ATO also prefer soft targets.
If you are aware of someone in these circumstances, perhaps the best help you can provide is to alert them to other (better) opportunities.
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The best solution is to make a complaint to the Fair Work Ombudsman. Unlike previous workplace enforcement agencies, this one is prepared to prosecute.
The case law is more than just the 80/20 rule issued by the Tax Office. You can be a contractor as far as the tax office is concerned but be an employee as far as the workplace laws are concerned.
Putting it very simply (and thus generally only so please seek further advice for your own circumstances) the following questions determine whether you are an employee or a contractor:
1. Can you make a loss or a profit? If you only supply your labour it is highly unlikely that you will be a contractor as you cannot make a loss from your own labour.
2. Do you pay your own tax? This is not determinative in itself but must be taken into account.
3. What was the intention of the parties? Again not determinative but an important consideration.
4. Are you seen as an integral part of the company or are you clearly a separate entity? Do you wear their uniforms, name badge etc.
5. Do you have the ability to delegate the work? If you are unavailable can you just ring up a suitably qualified friend and get them to do the work and then pay them accordingly?
6. Can you decide how the work is going to be done? Difficult one this given all the constraints of aviation training but still could be an issue.
7. Do you get paid by the hour or by results? Payment by the hour indicates an employment relationship may be in existence.
There are a few others but these are the major ones. You should also note that until recently it was almost a guarantee that if the instructor set up their own Pty Ltd company and contracted through that they would be guaranteed to be found to be a contractor. However earlier this year the Tax Commissioner won a decision in the Administrative Appeals Tribunal where a person employed by a corporation (his family company) was found to be an employee of his client and therefore not entitled to the tax deductions he was claiming through his family company. He now owes lots of tax.
I believe that any person engaged as a "contractor" to be a flight instructor is actually an employee. Any person in this situation is then able to pursue back pay for the previous 6 years as well as superannuation.
Hope this helps. If you want any specific advice or information please PM me.
The case law is more than just the 80/20 rule issued by the Tax Office. You can be a contractor as far as the tax office is concerned but be an employee as far as the workplace laws are concerned.
Putting it very simply (and thus generally only so please seek further advice for your own circumstances) the following questions determine whether you are an employee or a contractor:
1. Can you make a loss or a profit? If you only supply your labour it is highly unlikely that you will be a contractor as you cannot make a loss from your own labour.
2. Do you pay your own tax? This is not determinative in itself but must be taken into account.
3. What was the intention of the parties? Again not determinative but an important consideration.
4. Are you seen as an integral part of the company or are you clearly a separate entity? Do you wear their uniforms, name badge etc.
5. Do you have the ability to delegate the work? If you are unavailable can you just ring up a suitably qualified friend and get them to do the work and then pay them accordingly?
6. Can you decide how the work is going to be done? Difficult one this given all the constraints of aviation training but still could be an issue.
7. Do you get paid by the hour or by results? Payment by the hour indicates an employment relationship may be in existence.
There are a few others but these are the major ones. You should also note that until recently it was almost a guarantee that if the instructor set up their own Pty Ltd company and contracted through that they would be guaranteed to be found to be a contractor. However earlier this year the Tax Commissioner won a decision in the Administrative Appeals Tribunal where a person employed by a corporation (his family company) was found to be an employee of his client and therefore not entitled to the tax deductions he was claiming through his family company. He now owes lots of tax.
I believe that any person engaged as a "contractor" to be a flight instructor is actually an employee. Any person in this situation is then able to pursue back pay for the previous 6 years as well as superannuation.
Hope this helps. If you want any specific advice or information please PM me.
Last edited by notmyC150v2; 31st Aug 2009 at 00:28.
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I think there is also an issue of who is liable in the event of your work resulting in some kind of insurance claim or litigation, Also related issues with public liability and compo. Perhaps notmyc150 can clarify that one?
PS re charging for the CFI checkride, I don't do this but can be devil's advocate and see why some would, the "if you give me a casual job I've got some mates who want to learn to fly with me" brigade ...a large majority are tyre kickers. Induction is more than just a quick couple of circuits, and you don't want to find that the wannabee has taken up a week of your time to find that they then go and take a job up the road "because I get more money 'cos they'll let me be a contractor so I wont have to pay tax!" etc etc...and still no sign of those "mates"...!
PS re charging for the CFI checkride, I don't do this but can be devil's advocate and see why some would, the "if you give me a casual job I've got some mates who want to learn to fly with me" brigade ...a large majority are tyre kickers. Induction is more than just a quick couple of circuits, and you don't want to find that the wannabee has taken up a week of your time to find that they then go and take a job up the road "because I get more money 'cos they'll let me be a contractor so I wont have to pay tax!" etc etc...and still no sign of those "mates"...!
Make every post a winner!
As a contractor, you'll be able to claim most things............... Car/ bike, fuel, cloths, phone, computer, stationary and the list goes on.
This type of situation seems like a short term job, so make the most of it whilst you are there
Employers like this need to reduce their costs, as they are always having employees come and go. If they paid properly, it would more than likely work out better for everyone 
As mentioned above, make sure you are covered by their insurance and you may need to sign something to that effect.
There is always a Silver Lining and it is there for anyone that chooses to look for it!
All the best and hope a better opportunity comes along soon
This type of situation seems like a short term job, so make the most of it whilst you are there
Employers like this need to reduce their costs, as they are always having employees come and go. If they paid properly, it would more than likely work out better for everyone As mentioned above, make sure you are covered by their insurance and you may need to sign something to that effect.
There is always a Silver Lining and it is there for anyone that chooses to look for it!
All the best and hope a better opportunity comes along soon
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CFI, yes the provision of insurance is a very important one. Must be tired to have neglected that one.
As noted by SDD a contractor gets to claim all sorts of things as tax deductions. BUT please note my warning regarding the recent decision from the AAT. You may have to pay all that back if you are caught.
As noted by SDD a contractor gets to claim all sorts of things as tax deductions. BUT please note my warning regarding the recent decision from the AAT. You may have to pay all that back if you are caught.
If you are working as a contractor, make sure you have your own third party and public liability insurance and lots of it because someone, somewhere down the track is going to come unstuck and be hung out to dry.
Have a good read of notmyC150v2's post Everything points to the instructor whether casual or full time being an "employee".
I guess we sleep soundly knowing our staff receive full entitlements of leave, sick pay, workers comp etc.
Have a good read of notmyC150v2's post
Everything points to the instructor whether casual or full time being an "employee". I guess we sleep soundly knowing our staff receive full entitlements of leave, sick pay, workers comp etc.
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Contractor v Employee
The courts look at whether there is a contract of service rather than a contract for services when employing someone, to determine the employment relationship.
A person is not a contractor just because they claim to be one. The courts look at the underlying reality of the arrangement to determine whether the person is a contractor or employee. To do this the courts take into account a range of indicia. None of these elements are conclusive, but the more an arrangement exhibits the more likely they are to be a contractor.
contractor indicia includes but is not limited to:
received payment after submitting your invoice; use your own ABN; you are free in how the work is performed; your right to use or engage others; your right to engage and work for other customers; Use a written contract; provide own tools and equipment and maintain your own third party liability insurance.
Despite being indicia of employment, the fact a business pays workers compensation and payroll tax on payments to the contractors does not necessarily indicate an employment relationship. Each of these is a legislated requirement of the 'employer' and by making those payments the employer is merely meeting that requirement.
There is one case where a bicycle courier firm had 'contractors' that the High Court by following the not exhaustive list of indices determined were in fact employees .. AND I'd reckon a good red hot go at challenging an instructor is a contractor v employee could be well worth it.
A person is not a contractor just because they claim to be one. The courts look at the underlying reality of the arrangement to determine whether the person is a contractor or employee. To do this the courts take into account a range of indicia. None of these elements are conclusive, but the more an arrangement exhibits the more likely they are to be a contractor.
contractor indicia includes but is not limited to:
received payment after submitting your invoice; use your own ABN; you are free in how the work is performed; your right to use or engage others; your right to engage and work for other customers; Use a written contract; provide own tools and equipment and maintain your own third party liability insurance.
Despite being indicia of employment, the fact a business pays workers compensation and payroll tax on payments to the contractors does not necessarily indicate an employment relationship. Each of these is a legislated requirement of the 'employer' and by making those payments the employer is merely meeting that requirement.
There is one case where a bicycle courier firm had 'contractors' that the High Court by following the not exhaustive list of indices determined were in fact employees .. AND I'd reckon a good red hot go at challenging an instructor is a contractor v employee could be well worth it.
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This issue is all too common in the General Aviation sector. Worst of all, I don't see the AFAP do anything about it to improve the general pilot's working condition.
I previously enquired about this issue with the relevant government body. But I was told that certain state, such as WA, does not come under the "pilot award". Thus, you technically don't have anything covering you over there.
It's nice to be able to tell them to up theirs, except aviation is such a small community. I am afraid it would only gives you a bad name to your next employer.
Until the union and government grow a backbone to support the pilot's term and condition. This practise will continue to occur.
I previously enquired about this issue with the relevant government body. But I was told that certain state, such as WA, does not come under the "pilot award". Thus, you technically don't have anything covering you over there.
It's nice to be able to tell them to up theirs, except aviation is such a small community. I am afraid it would only gives you a bad name to your next employer.
Until the union and government grow a backbone to support the pilot's term and condition. This practise will continue to occur.
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Chimbu
"Not everybody has the luxury of being able to pick and choose between opportunities, nor are many employees"
What a load of crap - I hate that attitude. Grow some nuts. Stop selling out to the lowest bidder. Maybe you should put an application to V Australia and work in the office on your days off, you would fit in perfectly.
Snoop
"This type of situation seems like a short term job, so make the most of it whilst you are there"
Same crap here - if you do it, then the next guy does it and so on and so on. Whilst I agree with other parts of your post, this attitude stinks. You are neck and neck with Chimbu for the race to the bottom of the barrel for conditions.
Stop thinking of yourselves and look keep the conditions half 'decent'. That "I'm alright Jack" thinking is just ****.
Other companies outside of the instructing 'bubble' have tried this and failed miserably.
Akun - just read your post - AFAP need members to let them know how many of them are getting shafted. So it's up to YOU and others to let them know how to use YOUR money to fight for YOUR rights.
Quite simple put simply.
"Not everybody has the luxury of being able to pick and choose between opportunities, nor are many employees"
What a load of crap - I hate that attitude. Grow some nuts. Stop selling out to the lowest bidder. Maybe you should put an application to V Australia and work in the office on your days off, you would fit in perfectly.
Snoop
"This type of situation seems like a short term job, so make the most of it whilst you are there"
Same crap here - if you do it, then the next guy does it and so on and so on. Whilst I agree with other parts of your post, this attitude stinks. You are neck and neck with Chimbu for the race to the bottom of the barrel for conditions.
Stop thinking of yourselves and look keep the conditions half 'decent'. That "I'm alright Jack" thinking is just ****.
Other companies outside of the instructing 'bubble' have tried this and failed miserably.
Akun - just read your post - AFAP need members to let them know how many of them are getting shafted. So it's up to YOU and others to let them know how to use YOUR money to fight for YOUR rights.
Quite simple put simply.
Last edited by captwawa; 31st Aug 2009 at 06:08.
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Capt Akun, that will no longer be true come 1 January 2010.
From that date all pilots will be covered by the Air Pilots Award 2010. There will be only very limited exclusions for where pilots are catered for in a classification structure of another industry award.
From that date all pilots MUST be paid no less than the rates provided in the Award even if they have a current AWA, ITEA or Collective Agreement that provides less.
If they have no such industrial instrument covering them, ALL of the Award's terms and conditions will apply to them.
The Award has not yet been finalised but it should be available from the AIRC website from next Friday.
From that date all pilots will be covered by the Air Pilots Award 2010. There will be only very limited exclusions for where pilots are catered for in a classification structure of another industry award.
From that date all pilots MUST be paid no less than the rates provided in the Award even if they have a current AWA, ITEA or Collective Agreement that provides less.
If they have no such industrial instrument covering them, ALL of the Award's terms and conditions will apply to them.
The Award has not yet been finalised but it should be available from the AIRC website from next Friday.
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But....
There are two sides to every story remember. I know of one GA company in the NT who employs the majority of its pilots as contractors, and I know for a fact that they earn more then double the GA award.
Infact one of their bases, the pilots earn up to between 3 and 4 times the amount that another GA singe engine pilot would on the award. If the work is available, contracting is not so bad.
There are two sides to every story remember. I know of one GA company in the NT who employs the majority of its pilots as contractors, and I know for a fact that they earn more then double the GA award.
Infact one of their bases, the pilots earn up to between 3 and 4 times the amount that another GA singe engine pilot would on the award. If the work is available, contracting is not so bad.
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notmyC150v2 - Thanks for the heads up. I wasn't aware of such thing was occuring. I shall look into it before I open my mouth again.
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Sham Contracting
''Sham contracts
Sham contracting is where an employer tries to disguise an employment relationship as an independent contracting relationship.
This may be done to avoid having to give the employee their proper entitlements.
Sometimes, employers threaten employees with dismissal if they don't agree to become contractors. This is illegal.
Under the Fair Work Act 2009, the employer cannot:
disguise an employment relationship or proposed employment relationship as an independent contracting arrangement
dismiss or threaten to dismiss an employee to re-engage them as an independent contractor
knowingly make a false statement to persuade or influence an employee to become an independent contractor.
Penalties
Fair Work Inspectors may take an employer to court if they find the employer is involved in sham contracting.
If you're in the building and construction industry, Australian Building and Construction Commissioner (ABCC) Inspectors may take court action for sham contracts.
The courts may order the employer to pay a penalty of up to $33,000 per contravention.'' - Home
As notmyC150v2 said - try the Ombudsman "www.fwo.gov.au"
There is live chat help on there and you can put your question to them and get a pretty quick response.
Its generally a case of - "they do is as long as they can til they get caught - then they plea we didn't know our obligations".
Stick it to 'em.
Sham contracting is where an employer tries to disguise an employment relationship as an independent contracting relationship.
This may be done to avoid having to give the employee their proper entitlements.
Sometimes, employers threaten employees with dismissal if they don't agree to become contractors. This is illegal.
Under the Fair Work Act 2009, the employer cannot:
disguise an employment relationship or proposed employment relationship as an independent contracting arrangement
dismiss or threaten to dismiss an employee to re-engage them as an independent contractor
knowingly make a false statement to persuade or influence an employee to become an independent contractor.
Penalties
Fair Work Inspectors may take an employer to court if they find the employer is involved in sham contracting.
If you're in the building and construction industry, Australian Building and Construction Commissioner (ABCC) Inspectors may take court action for sham contracts.
The courts may order the employer to pay a penalty of up to $33,000 per contravention.'' - Home
As notmyC150v2 said - try the Ombudsman "www.fwo.gov.au"
There is live chat help on there and you can put your question to them and get a pretty quick response.
Its generally a case of - "they do is as long as they can til they get caught - then they plea we didn't know our obligations".
Stick it to 'em.
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... need to be careful and NOT presume that the new award will kick in automatically on Jan 1, 2010.
The award will detail the MINIMUM conditions applicable for the employment category, and will apply in the absence of any other lawful employment agreement, which itself cannot be less than the award.
ITEA'S should have a notional end date of 31 Dec '09, and AWA's should be long gone.
If you know where to look, there is a DRAFT copy of the proposed award and its conditions available .. the S.A. Business website for example did have a link to it the last time I searched a few days ago ...
The award will detail the MINIMUM conditions applicable for the employment category, and will apply in the absence of any other lawful employment agreement, which itself cannot be less than the award.
ITEA'S should have a notional end date of 31 Dec '09, and AWA's should be long gone.
If you know where to look, there is a DRAFT copy of the proposed award and its conditions available .. the S.A. Business website for example did have a link to it the last time I searched a few days ago ...
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Voice, AWA's and ITEA's continue in force until they are terminated or replaced by a Collective Agreement. The nominal expiry date for ITEA's cannot be later than December this year, but, if they are not terminated they just continue on.
The Government has set a deadline of 31 December 2009 for the Modern Awards to be finalised so they come into force from 1 January. Whilst it is clear that some Awards will still be "haggled over" by that time, I think that they will be in force.
I treat the Draft Awards with a fair amount of disdain because they are usually vastly different to what is actually handed down. We should at least see the one for pilots next Friday.
The Government has set a deadline of 31 December 2009 for the Modern Awards to be finalised so they come into force from 1 January. Whilst it is clear that some Awards will still be "haggled over" by that time, I think that they will be in force.
I treat the Draft Awards with a fair amount of disdain because they are usually vastly different to what is actually handed down. We should at least see the one for pilots next Friday.