Freelancer – Consultant or Independent Contractor?

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A term we are seeing used more often in Australia is Freelancer.

We are very familiar with the term independent contractor and a consultant in Australia, but freelancer is often a term that is more used overseas.

Is there a difference between a Freelancer, a Consultant and an Independent Contractor?

The basic answer is – No.

In Australia, an independent contractor or consultant is basically a freelancer, and this is true for the purposes of taxation.

What are my entitlements as a freelancer when I am engaged by another party?

A freelancer worker is a person who self-employed and is not committed to undertake work for one employer either on a full-time or long-term basis.

Generally, a freelancer will work for various third parties to undertake a particular assignment or for a fixed period.

From a taxation perspective they will be liable for their own tax, superannuation and will have a registered Australian Business Number (ABN), whereas an employee will not.

They are also responsible for their own leave including sick leave and will not be entitled to it from the principal they enter an agreement with.

An employer has to be very careful not to try and present an employee as a freelancer is there is not that relationship.

Under the Fair Work Act 2009, independent contractors are protected from:

  • adverse action – for example, a business can’t terminate a contract with a contractor because they made a complaint to a regulator about their workplace rights
  • coercion – for example, a business cannot threaten to take action against a contractor to coerce them not to exercise their workplace rights
  • abuses of freedom of association – contractors are free to join, or not join, a trade union or employer group.

The Independent Contractors Act 2006 has provision which allow an independent contractor to ask a court to review a contract on the grounds that it’s ‘unfair’ or ‘harsh’. The court may consider:

  • the terms of the contract when it was made
  • the relative bargaining strengths of the contract parties and, if applicable, anyone acting on their behalf
  • whether there was any undue influence or pressure, or any unfair tactics used against, a party to the contract
  • whether the contract provides remuneration that is less than that of an employee doing similar work
  • any other matters the court thinks is relevant.

The court can make orders changing the terms of the contract or ever set aside the whole or part of the contract.

It is also important to remember as a freelancer you must comply with the relevant state or territory’s workplace health and safety laws.

What are the advantages and disadvantages of being a freelancer?

As outlined above, a freelancer is not entitled to the superannuation and leave entitlements of an employee. There can be job insecurity and they are responsible for managing their own workflow and taxation requirements.

One of the benefits I often hear from freelancers is that they can choose their hours of work, remuneration rate and type of work they do.

What should be included in a Freelancer agreement?

It is very important as a freelancer to have a legal binding agreement yourself and your client. This will inevitably lead to less uncertainty and problems.

What are the ingredients for a good agreement?

  • A clear introduction which clearly outlines the parties and their details
  • Clear and precise language
  • A clear and specific outline of the scope of the work to be undertaken
  • Payment terms and invoicing
  • Termination and what can cause the agreement to be terminated
  • Dispute resolution processes
  • Protection of intellectual property
  • Confidentiality
  • Compliance with relevant workplace policies and statutory obligations
  • Insurance and indemnity
  • Governing law
  • Execution.

How can FC Lawyers help?

The FC Lawyers business and corporate team have for nearly 30 years been assisting freelancers, consultants and independent contractors with their business structures and agreements.

Contact us for an obligation free discussion as to your needs.

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