Sham contracting is a serious issue affecting workers and businesses across Australia. Understanding what it is, why it happens, and how to avoid it is essential for maintaining fair, compliant workplace arrangements.
What is Sham Contracting?
Sham contracting occurs when an employer disguises an employment relationship as an independent contracting arrangement. The worker is engaged as a "contractor" on paper, but in reality works as an employee.
This practice denies workers their lawful entitlements including:
- Superannuation contributions
- Annual leave and sick leave
- Workers' compensation coverage
- Unfair dismissal protections
Why Does It Happen?
Cost reduction, flexibility, and sometimes genuine misunderstanding of the legal distinctions between employees and contractors.
Legal Consequences
- Civil penalties up to $93,900 per contravention
- Back-payment orders for unpaid wages and super
- Reputational damage
Need Help?
If you're unsure whether your contractor arrangements are compliant, Procurement Associates can help with practical, risk-aware advice.
