I think I'm wrongly classified as a contractor
Sham contracting in Australia — the employee vs contractor test, your rights, and how to report it.
Employee vs contractor — what's the difference?
An employee works in the business, follows the employer's direction on how to do the work, uses the employer's tools and equipment, and can't delegate tasks to someone else. A contractor runs their own business, has control over how the work is done, provides their own tools, can subcontract, bears financial risk, and works for multiple clients. If you're being treated like an employee but paid as a contractor, you may be a victim of sham contracting.
The real test courts use
Following the High Court's decisions in CFMMEU v Personnel Contracting and ZG Operations v Jamsek (2022), the primary test is the terms of the contract. Courts look at: whether the contract gives the employer the right to control how work is done, whether you can work for others, whether you can delegate or subcontract, and whether you bear commercial risk. However, if the contract doesn't reflect the real arrangement, the actual working relationship matters.
Signs you might be misclassified
You're likely an employee, not a contractor, if: you're told when and where to work, you use the employer's equipment, you can't subcontract or delegate work, you're paid hourly or weekly (not per project), you wear the company's uniform, you work exclusively for one business, you don't have your own ABN by choice, or the employer deducts 'tax' from your pay.
Why employers do this
Sham contracting saves employers money — no super, no leave, no workers comp, no payroll tax, no unfair dismissal risk. Some employers genuinely misunderstand the rules. Others do it deliberately. Either way, it's illegal under section 357 of the Fair Work Act. Penalties for employers can be up to $93,900 per contravention for individuals and $469,500 for companies.
What you're missing out on
If you're wrongly classified as a contractor, you're missing: superannuation (12% of your earnings), paid annual leave (4 weeks per year), paid personal/carer's leave (10 days per year), notice of termination, redundancy pay, workers compensation insurance, and protection from unfair dismissal. Over a year, this can add up to thousands of dollars.
How to report it
1. Gather evidence — your contract, payslips (or invoices), rosters, emails showing how your work was directed. 2. Contact the Fair Work Ombudsman on 13 13 94 or lodge a complaint online. 3. You can also report unpaid super to the ATO. 4. Consider getting legal advice — many employment lawyers offer free initial consultations for sham contracting cases. 5. You can claim back pay, leave entitlements, and super for up to 6 years.
Use these tools
Official resources
General information and estimates only — not legal, financial, or tax advice. Always verify with the Fair Work Ombudsman (13 13 94) or a qualified professional.