Gone are the days when if you wanted to be a real estate agent, you had no option but to simply work for an agency as an employee and receive a humble wage in return.
These days there are a number of work arrangements you can negotiate with an agency, and a common and popular choice (not just for the real estate industry) is to work independently as a real estate contractor.
Contracting is a tempting option for workers because of the potential to make more money than you might as an employee, and the notion that you’ll have more workplace freedom. You will generally have more flexibility with the hours you work, and you can call the shots a lot more.
The attraction for employers to this option is the ability to avoid having to pay expensive employment obligations such as leave entitlements, workers compensation and superannuation.
Whilst working as a contractor seems to be a win-win for both parties, this kind of employment arrangement sometimes comes with a few grey areas. Occasionally, if the contractor has the characteristics of an employee, the law might categorise that worker as an employee.
Let’s take a closer look into how you can work out, by law, the difference between a contractor and an employee.
Are you a real estate contractor or employee?
Here are some common indicators to look for when you’re determining the difference:
- Control – when an employer has the right to exercise a high degree of control over a worker (whether they carry out that right or not), it’s likely the worker will be regarded as an employee. A contractor will usually work autonomously for the majority of the time, whereas an employee will be under the direct control of the employer.
- Integration – if the worker runs a business that is separate to the real estate agency, they are more likely to be an independent contractor.
- Risk – employees are seen as the responsibility of the employer and bear no financial risk. Contractors must be responsible for their own finances, quality of work and injury, and as a result they should have their own insurance.
- Hours – employees generally work set, pre-negotiated hours and stick to this unless alternative arrangements are made. A contractor on the other hand will often choose the hours they work as long as they complete the task required of them.
- Salary – employees are paid a regular, set, pre-negotiated wage and have their tax automatically deducted from their payment. Contractors will have their own ABN and submit a tax invoice for payment by the real estate agency, and must pay their own tax, GST if applicable, superannuation, workers compensation and insurance.
- Leave entitlements – employees are entitled to paid annual leave, sick leave, personal leave and long service leave. Contractors do not receive paid leave.
It’s very important for real estate agencies as employers to realise and understand the difference between an employee and a contractor.
If an agency were to hire someone as a contractor only to have them later be classified as an employee, they could face some serious consequences under Fair Work Australia. The rights of the worker would be covered by an Award, and unless the agency can properly show that the worker can be classified as a contractor, they may be required to pay any entitlements owing to the worker. This could be rather costly if the working arrangement has been in place for some time.
Real estate agencies should have properly drafted contracts in place to deal with the rights and responsibilities of themselves and their workers, regardless of whether the working relationship is as an employee, contractor or any other type of arrangement.
This is an important are to get right, so please share this article with your real estate colleagues!