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Contractor redefinition ‘undermines sole traders’

Business

The Closing Loopholes bill would force companies to treat contractors like employees to the detriment of the smallest business owners, one lobby group says.

By Philip King 10 minute read

A law that redefines contractors so they are treated more like employees undermines the ability of sole traders to run independent businesses, one lobby group says.

Entrepreneurial & Small Business Women Australia (ESBWA), an advocacy organisation representing female entrepreneurs, said the 1.1 million people working as contractors would lose flexibility and independence if businesses were forced to treat them like full-time staff.

CEO and founder of ESBWA Amanda Rose said the Fair Work Legislation Amendment (Closing Loopholes) Bill currently before Parliament would add a range of benefits but backfire on the contractors themselves.

“They want independent contractors to be employee-like,” she said. “For example, they could potentially get annual leave, unfair dismissal, super, a whole range of things which would make them like an employee.”

“That can be extremely damaging for the sole trader that is trying to get contract work from a larger company because they get paid more. If that larger company then has to treat them like an employee … then they'll slash that independent contractor rate.”

“And then that person has to work a lot more to be able to get the same amount of money that they would have previously as a contractor.”

She said the bill also threatened the autonomy of sole traders by making it more difficult for them to hire others like themselves. A typical sole trader with a big business contract might hire other sole traders to help out, but under the new requirements that could become prohibitively expensive.

“If you change the definition you have to pay insurance for them – public liability insurance, professional indemnity insurance – then super, potential unfair dismissal.”

“Then what will happen is that person who got that contract will say, ‘Actually, sorry, I can't fulfil this contract because I can't permanently hire people or I don't have the resources to be able to pay all these extra things for a contractor.”

Ms Rose said businesses might switch from contractors to employees or work solely with proprietary limited companies. The net result would be to limit the progress of businesses that relied on the cost-effectiveness and agility of contractors to grow.

She said the government was ignoring the needs of the ESBWA membership of 12,500 female business owners in direct opposition to its stated goals.

“The government may talk about empowering women, but the real test of that commitment is in how it empowers women to reach financial independence,” she said. “This is why ignoring the needs of female business owners in the amendment of this legislation would be a regressive step.”

The loss of flexibility for independent contractors and restriction on the growth of small businesses was a “huge step in the wrong direction for female small business owners”.

“This in turn could result in many female sole traders having to work additional hours or take on more contracts to maintain their income levels, negating the advantages that drew them into gig work in the first place.”

“Female sole traders are attracted to the gig economy because of the flexibility it offers. It allows them to balance competing priorities such as caregiving while earning money on their own terms.”

“Changing the definition of a sole trader means women will have fewer options to build their businesses and secure financial independence.”

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Philip King

Philip King

AUTHOR

Philip King is editor of Accountants Daily and SMSF Adviser, the leading sources of news, insight, and educational content for professionals in the accounting and SMSF sectors.

Philip joined the titles in March 2022 and brings extensive experience from a variety of roles at The Australian national broadsheet daily, most recently as motoring editor. His background also takes in spells on diverse consumer and trade magazines.

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