Case Studies

Case Study Number 1

Back to the future.

Following advice from their external accountants a national company converted contractors within their direct sales, tele-appointing and customer service departments to employment.

However, over time the company experienced a reduction in productivity and profitability as a direct result of moving away from their former highly incentivised direct contractor engagement model.

The management wanted to go back to an incentivised, productivity based contracting model and offer this as an engagement option across their business. Working closely with the client, their advisors and accountants a lawful independent contracting model was designed to meet the specific needs and operational requirements of the business.

Our third-party “arm’s length” framework removed the compliance risk associated with the business utilising independent contractors. The key to the designing the model centred on ensuring the participants were exceptionally well rewarded for their efforts and the outcomes they attained. Another key issue was to ensure at all times fairness was assured and that any employees who wanted to change were volunteers.

The Outcome: Productivity improved, process efficiencies were introduced via the use of our third party system resulting in reduced payroll management and general administration costs.

Case Study Number 2

Allies in Allied Health.

Our team are regularly invited to speak at industry conferences and IR workshops. The topic of conversation we follow focuses on outlining the inherent risks apparent when deploying largely or wholly labour based independent contractors.

Following a talk at an industry based workshop we were contacted by the owner of a large physiotherapy practise.

We had outlined the solution to compliantly engaging labour based contractors on a long term basis and the business owner wanted to know more.

In addition to physiotherapy services the practise provided associated services such as Pilates classes and Remedial Sports Massage. Following discussions with the owner it was apparent the Practise Manager thought having an ABN was a business license and the holder was automatically running a business enterprise.

The Practise Manager also believed having an ABN removed the obligation to meet statutory requirements such as WorkCover Superannuation and Payroll Tax when labour based contractors worked long term. She also believed an independent contracting agreement purchased from an HR company legitimised the arrangement. While the Practise Manager had acted in good faith, the financial risks associated with continuing to operate this way were not acceptable to the owner.

The Outcome: Working with both the owner and Practise Manager the engagement of all the contractors was re-engineered. This meant both the company and contractors were compliant under the following statutes with all risk removed.

Case Study Number 3

Not very Civil Contracting.

A civil engineering company deployed several ABN sole traders as Project Managers for extended periods of time. The individual contractors were paid well, earning in excess of $300K per annum.

The business utilised contractors to maintain operational flexibility and maximise productivity while freeing themselves from the more onerous inhibitors they perceived under the Fair Work Act.

The owners were happy with these arrangements as the contractors were focused on the objectives they were required to achieve. When the projects were completed the contractor’s assignments ceased.

One of the contractors was advised by his accountant that as an ABN sole trader he should have received superannuation calculated and paid over and above the agreed payment rate.

When challenged about this the civil engineering business claimed that super had been inclusive in the hourly rate paid and this had been written into the agreement signed by the parties.

While the intent of the agreement was very fair, it was not feasible to contract out of the superannuation guarantee charge legislation – it’s the law.

Unfortunately, the company was subjected to an ATO superannuation investigation and had to make superannuation payments to the approved funds of all the contractors.

The Outcome: The Company needed to maintain their operational flexibility on a project by project basis while maintaining productivity driven out comes. Working with our team a compliant engagement model was structured to maintain the status of the contractors without having the need for an ABN.

Case Study Number 4

Manufacturing Mayhem.

Through a series of mergers and acquisitions a public company expanded its national manufacturing footprint.

Due to output demands the manufacturing operations were required to run on a 24/7 basis. This operational need created significant demand on machinery reliability and on maintenance crews in order to ensure manufacturing continuity.

Following a thorough IR and HR review of the newly acquired manufacturing facilities, management were alerted to significant legacy issues apparent in two sites located in different states.

Both sites used mechanical fitters and industrial electricians within their maintenance departments. The individuals were deployed as sole trader independent contractors utilising agreements created by the former head of the HR department.

The overarching review was conducted by an outsourced specialist HR company who were concerned the contractor engagements were non-complaint. They enlisted the ContractRight team to conduct a contractor engagement assessment and report.

This revealed there were significant compliance risks in how the contractors were currently deployed, the HR Company experienced considerable push back from the contractors when they were made aware of the issues.

We were invited to present the contractors with an in-depth assessment of the compliance problem, the reason it was present and the mutual implications of not fixing the issues.

The Outcome: Each of the individuals wanted to remain an independent contractor so the arrangements were reconstructed into the ContractRight third party framework with productivity outputs retained as the key drivers.

Managing Change

At ContractRight we are aware that maintaining business continuity is critical for our client companies.

This is why we have designed, tested and proven a collaborative, positive and structured change management program to ensure business continuity is maintained.

This process provides a robust framework for the management and implementation of changed contracting arrangements required to ensure a business maintains regulatory compliance.