Note: This article has been updated to reflect the National Minimum Wage increase effective last 1 July 2017.
What exactly does a “fair rate of pay” mean for a contractor? It’s perhaps the most common question we’ve been asked in more than 15 years of providing contractor administration services.
First of all, unlike employees, independent contractors are not entitled to minimum wages or other benefits (such as annual leave, sick leave, etc.) that are contained in the National Employment Standards, Modern Awards and other industrial instruments.
Independent contractors receive payment for the work they do – they are engaged under commercial contracts that recognise the old adage of risk and reward. This means that contractors carry the risk of making a profit or loss. In our experience, offering results-based contracts typically has the mutually beneficial outcome of increasing productivity for the business and bigger profit for the contractor.
Independent contracting arrangements must satisfy the “Fair Contracts” provisions of the Independent Contractors Act, specifically Section 9. What is an unfairness ground and Section 12. Court may review services contract. In determining whether a contract is harsh or unfair, a court may consider such things as the terms of the contract, the relative bargaining power of the parties and whether the contract offers less remuneration than an employee doing similar work.
Indeed, it is this last point that must be considered in calculating a fair rate of pay for contractors.