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What is sham contracting?

Sham contracting is an illegal, but widespread, practice in the ACT building and construction industry.

It occurs when an organisation signs up workers as independent contractors (also known as ABN*ABN
Australian Business Number
workers) instead of hiring them properly as employees.

Organisations use sham contracting so they can avoid giving a worker their working rights and entitlements. Workers on sham contracts miss out on rights and entitlements such as:

> sick leave, holiday leave and long service leave
> overtime and public holiday rates
> protection against unfair dismissal
> redundancy payouts
> superannuation payments (paid by your employer at 9% of your salary)
> extra payroll tax
> workers' compensation insurance
> minimum award wages and conditions
Why do we need to stamp out sham contracting?

Sham contracting erodes the wages and conditions of workers.

Sham contracts deny workers many of the benefits and protections that they are legally entitled to.

If you're on a sham contract, you are responsible for paying your own income tax to the ATO.

And it's not just workers who are ripped off by sham contracting, it's our community as well.

By disguising employment relationships as independent contracts, organisations avoid paying payroll tax. That means less money for our schools, roads and hospitals.

When organisations don't pay superannuation, it shifts the burden of funding workers' retirements onto society. Workers without superannuation savings have to rely on government pensions.

Sham contracting gives an unfair competitive advantage to organisations doing the wrong thing. By evading tax, not contributing to superannuation and not adhering to Awards, organisations that engage sham contractors are able to undercut honest organisations who are doing the right thing by their workers and the community.

How do I know if I'm on a sham contract?

Not all ABN workers are sham contractors. Many independent contracting arrangements are legitimate.

You can tell the difference between a genuine independent contractor and a worker on a sham contract by looking at the relationship between the organisation and the worker.

Here is how to tell the difference:

Genuine independent contractors Sham contractors

Operate their own businesses and are likely to advertise their services.

Enter into contracts for service with more than one business or client.

Are hired on a temporary basis to carry out a specific task.

Provide invoices for the work they do.

Generally set their own hours of work and supply their own tools, equipment and materials.

Work for a single organisation.

Are told by that organisation when and where to show up for work, when to take breaks and what tasks to perform throughout the day.

Are engaged on an ongoing basis and are usually paid weekly or fortnightly for the hours they work.

Bear no commercial risk on the job, which means that if the organisation's business venture fails, they still get paid for the hours they work.

If you work like an employee but are on an independent contract, then you may be on a sham contract.

I think I'm on a sham contract...what should I do?

If you think you are on a sham contract you must speak up, because you and your organisation may be breaking the law.

You may also be owed a lot of money in unpaid superannuation and other benefits.

To make sure you get the best advice and protection contact your union or the Fair Work Ombudsman.



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For more information on sham contracting or to report a breach, call the Fair Work Ombudsman on 131 394 or the CFMEU ACT branch on 02 6267 1599. Slam The Sham
Australian Government
CFMEU