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14 Sep 12 More on contractors versus employees

MEMBER 192 responds to Member 184's feedback in last week's TAXVINE - see 2012 TAXVINE No 34 (7 September 2012):

"I could not agree more with Member 184 about the problem of subcontractors -v- employees. I have a client who also operates in a booming area and they tried to do the right thing by putting all their workers on as employees. They had lengthy meetings with their workers before the change and explained what they were doing and why and adjusted the hourly rates being paid to take into account the fact that they were now having superannuation paid for them as well as holiday pay, etc.

Now, a few months down the track more than 50% of their workers have left and gone to work for other contractors in the area who will treat them as subbies. My client is now desperately trying to finish contracts without sufficient workers.

Then, of course, there is the other side of the coin. I have another client who is working in a area where jobs are very difficult to find. Some years ago, before I met this client, his employer told him that he had to become a contractor and arranged for him to see a lawyer who set up a family trust for him. My client was told that this would save him thousands in tax and was definitely the way to go. My client did not want to form a family trust but was told that if he didn't, he would lose his job. The family trust has not saved him anything in tax because his wife earns similar money to him and they have no children and it costs him accounting fees to keep it going. Now this young couple is trying to borrow to buy their first home and because he is employed through a family trust they are having great difficulty in finding a lender who will even talk to them. This client is definitely an employee but the company he works for won't face up to their responsibilities.

Bring back the PPS (or something very similar) as quickly as possible."

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