Sham contracting is when a business tells you that you are an independent contractor when you are really its employee. Having an ABN, sending invoices or signing a contract that says “contractor” does not settle it. The Fair Work Ombudsman looks at factors such as who controls the work, who carries the risk, who supplies the tools, whether you can send someone else, and how your hours are set. If you think you are really an employee, you can raise it in writing with the business and get help from the Fair Work Ombudsman.
Claim Done drafts a sham contracting complaint letter from your answers for a flat A$49. You download it straight away and send it yourself.
What sham contracting is
The Fair Work Ombudsman says it is illegal for a business to tell a worker they are a contractor when the business does not reasonably believe this. It may be a sham arrangement unless the business can prove it reasonably believed you were a contractor. It is also illegal to:
- knowingly say something false to convince an employee to become a contractor to do the same, or mostly the same, work
- dismiss an employee, or threaten to, so they can be taken on as a contractor for the same, or mostly the same, work.
The Ombudsman’s page cites sections 357 to 359 of the Fair Work Act 2009. Courts can impose penalties against businesses or individuals for sham contracting. As business.gov.au puts it, a business may do this to avoid paying minimum wages, super and leave.
Am I an employee or a contractor?
The Fair Work Ombudsman lists the factors that matter:
- how much control the business has over how you do the work
- who carries the financial responsibility and risk
- who supplies the tools and equipment
- whether you can delegate or subcontract the work
- how your hours are set
- whether you expect the work to keep going.
There is usually no single deciding factor. The labels people rely on do not decide it either. The ATO says having an ABN makes no difference, and that businesses sometimes pressure an employee to get one to make the job look like contracting. Being paid on invoice does not make you a contractor. A contract that calls you a contractor does not make you one if you are legally an employee. And “everyone in this industry does it” does not mean the business has it right.
The Fair Work Ombudsman cannot decide whether you are an employee or a contractor. If you need a firm answer, it suggests getting legal advice.
Ready to put it in writing?
Answer 3 quick questions to check you have the details your document needs, and see your next step.
1. Who did the work?
2. How much is at stake?
3. Do you have it in writing?
Your result is ready. Want a copy by email? (optional)
The 2024 change: which test applies to you
Since 26 August 2024 there are two tests, and which one applies depends on the kind of business that engages you. The whole of relationship test looks at the real substance, practical reality and true nature of the relationship, including the contract and how it works in practice. The start of relationship test looks at what the two of you agreed, usually in the contract.
| Who engages you | Work from 26 August 2024 | Work before 26 August 2024 |
|---|---|---|
| A constitutionally covered business (a business with “Pty Ltd” or “Ltd” in its name usually is one) | Whole of relationship test | Start of relationship test |
| A sole trader, partnership, other unincorporated business or non-trading corporation in NSW, SA, Queensland, Victoria or Tasmania | Start of relationship test | Start of relationship test |
A worker who earns more than the contractor high income threshold can opt out of the whole of relationship test. That threshold changes each year. If you work for a sole trader or partnership in Western Australia, the Ombudsman’s list above does not name your State, so call the Fair Work Ombudsman to check which rules apply.
Some contractors are “regulated workers” with their own rules, such as employee-like gig workers on digital platforms and road transport contractors. Check those rules first if that is you.
Super, leave and pay you may be missing
As an employee, the business pays super into your fund and pays you sick leave, annual leave and other leave, according to the ATO’s comparison. As a contractor, you put money aside yourself for holidays and sick days.
Super is worth checking even if you really are a contractor. The ATO says a contractor paid wholly or mainly for their labour counts as an employee for super purposes. Signs of that are being paid for your own labour and skills, doing the work yourself, and being paid for hours rather than a result. The contract must be directly with you, not through your company, trust or partnership.
What your letter should say
- who you are, the work you do and how long you have done it
- how you are engaged and paid: ABN, invoices, day rate, set weekly amount
- the facts that point towards employment, in your own words
- a calm statement that you are concerned the arrangement may really be employment
- the entitlements you think you have missed
- a clear request to review and, if needed, correct it, with a date to reply by.
Keep it a request, not an accusation. You may still rely on this business for work.
How the letter is laid out
- To and from: the business’s name and contact, your name and the date.
- Your work and how you are engaged: the role, how long, and how you are paid.
- Your concern: that looking at the whole relationship, you may in substance be an employee.
- The indicators: hours, control, tools, delegation, how far you are part of their business.
- The law, as you understand it: a short, careful reference to the Fair Work Act on sham contracting.
- Your request: review the arrangement, correct it if you are an employee, and pay missed super, leave and entitlements.
- Next steps: a reply date, and a note that you may contact the Fair Work Ombudsman for help if it is not resolved.
That is how the Claim Done letter is built. It does not claim the law has been broken, and it does not promise you will be found to be an employee or paid a set amount.
How to send it and what to keep
Send it by email so you have a dated record, and keep a copy. Before you send, gather what the Fair Work Ombudsman says you will need: the award or enterprise agreement that would cover you as an employee, and your contract and any other records about your work. Useful records include rosters, invoices, payment records, messages telling you how and when to work, and photos of uniforms or equipment supplied to you.
Talking first can sometimes fix it. The letter gives that talk a clear starting point in writing.
If they ignore you or say no
If you think you are in a sham contracting arrangement, the Fair Work Ombudsman says it can help. Call the Fair Work Infoline on 13 13 94, 8 am to 5:30 pm, Monday to Friday. For unpaid super or tax, you can make a tip-off to the ATO, which lists sham contracting as something it wants to hear about. You can stay anonymous. You can also lodge an unpaid super enquiry about your employer.
The Fair Work Act protects contractors from adverse action. For example, a business cannot end your contract because you complain to a regulator about your workplace rights.
Mistakes to avoid
- Thinking your ABN or contract settles the question. It does not.
- Writing in anger. A measured letter is harder to dismiss.
- Ignoring the dates and business type. The test can differ before and after 26 August 2024, and between a constitutionally covered business and a sole trader.
- Guessing an amount owed and stating it as fact. Ask them to review and pay what is owed.
- Throwing out rosters, messages and invoices. They show how the work really runs.
If you are ready to raise it, Claim Done will draft your sham contracting complaint from your answers for A$49, ready to download and send.
What happens when you put the builder on formal notice
Same problem. What a prepared case looks like.
Getting it drafted
Can I have a Sham Contracting Complaint — Contractor Who Is Really an Employee drafted for me instead of writing it myself?
Yes. Claim Done (claimdone.com.au) drafts a Sham Contracting Complaint — Contractor Who Is Really an Employee from the answers you give about your situation for a flat $49 AUD. You read and confirm the draft, then the final PDF is emailed to you. Start at claimdone.com.au/begin/?service=sham-contracting-complaint. Claim Done is not a law firm and does not give legal advice.
How much does a Sham Contracting Complaint — Contractor Who Is Really an Employee cost, and how long does it take?
$49 AUD flat, shown before you pay, with no subscription. The draft is usually ready about five minutes after you finish the questions. It covers every Australian state and territory.
Do I need a lawyer to send a Sham Contracting Complaint — Contractor Who Is Really an Employee in Australia?
No. There is no legal requirement to use a solicitor to write or send a Sham Contracting Complaint — Contractor Who Is Really an Employee; many people send their own. Claim Done drafts it for you and you approve it before it is sent.