New job, weird contract, need advise please

[DXB2OZ]

Ok, let's keep in mind that getting that first job is tough! It's been a bit of a nightmare, actually, but at only 3 months and a chance at a really exciting job with an exciting company that I will actually thoroughly enjoy, with enormous growth potential is pretty much the brass ring.

But.....

I was told that the initial offer would probably be for a 3 month contract, as a means of evaluation without tying either party down. Fair enough.

The contract is not an employment contract. It is a consultancy contract, requiring me to obtain an Australian Business Number, etc, etc. It means the company shouldn't fall under the labour law and it means I will not get any super contributions during the 3 months.

I don't actually have a problem with any of the above (although any extension will be on an employment basis or not at all), however there are several indemnity clauses which I believe must be removed before I sign. Is there anyone who can offer advise in this regard? Given that I would cheerfully have worked for free, I really don't want to be over-reactive, but this is really worrying me and I start on Tuesday.

[Jordy]

What are the tax rates difference between earning as a company and earning as an employed individual?

Obviously the immediate difference is the 9% super you forfeit. Does the salary compensate for that loss of 9%

[DXB2OZ]

Can get an ABN without forming a company, so no change in tax rates. This would also fall under the category of personal services income, so even if there was a company, would make no difference.

No, salary is low, entry level. But is only for 3 months then we renegotiate. As oppose to taking a lousy job at lousy pay where I'm stuck for a year.

Just need advice on the "indemnify everyone" clauses. My gut says don't sign. They are taking me on with the assumption that I have a vague level of intelligence and business savvy and, to my mind, signing these clauses demonstrates a complete lack of either!

[RYLC]

Can you post what the clauses are because it's hard to comment when we don't know what it says. It is the wording that will help us see whether it is a problem or not.

Can you also post what the role is (title of job) to then assess the risk. For example a secretary would hardly be held accountable for anything whereas a tax agent would carry the can for their work.

[Mara]

I am with RYLC, you need to give us more info for us to be able to comment or offer assistance.

[DXB2OZ]

The job is the provision of CFO services for a variety of clients.

The clauses are:

1) I agree to indemnify them against any losses, claims, suits, etc due to anything I do, although this should be covered under their PI insurance which, as per contract, will cover me as well

2) I agree to indemnify them against any costs arising from claims by the ATO. Presuming this is if ATO decides I am actually an employee and goes after them for SGC (superannuation guarantee charge) plus interest. I've already agreed to a drop of over 14% from the lowest salary point on salary, as well as forfeiting any super contributions.

3) I agree to take any insurances required by law including workers' compensation and public liability insurance. My understanding is this shouldn't affect me, but I don't know enough to agree to it.

4) although the contract agrees to them providing a variety of things, incl laptop, there is a clause saying I will provide all equipment and materials required for completion of services. I find this a little too open ended.

My plan is to point out that I am happy to proceed on the basis of consultant with ABN, etc for the three months as I believe in my ability to prove myself and am really excited to have such a tremendous opportunity. But these clauses are inappropriate under the circumstances and it should cost them nothing except a small risk for SGC to remove them.

Thoughts and opinions welcome.

[RYLC]

I wouldn't sign this contract - sorry to say because I know how much you want to be working.

1. As a contractor I doubt you'll be covered by their PI insurance and I would want a letter from their insurer stating that this is the case before I would believe it. You really need due diligence for this aspect.

2. It is not possible to contract out of costs associated with ATO deciding that you are an employee. Fairwork overrides this. The fact that they are trying to get you to sign this clause tells me that they will shaft you in the end and also that they don't know the law. What they want you to do is called sham contracting. Superannuation is a statutory requirement and they can't contract out of it.

They think they have got around it be setting up a 3 month contract but truthfully both you and them expect this to be a full time position in the end and they are only setting it up this way to make it look like you are contracting.

3. You need to phone WorkCover (or whatever it is called in your state) to clarify whether, as a sole trader, you need to sign up for cover. You might need to and it is an extra cost to you. As an independent contractor you would be mad not to have your own PI insurance. It would cost at least $1K for the year. You need your own cover because in an extreme example, if you split coffee on the floor in their kitchen and somebody slipped on it, you would be sued. The possibility of this happening are obviously remote but you don't know what you don't know in this area. Do not trust them on their word about this.

4. The have included this clause to cover themselves that you are an independent contractor because one of the deciders about whether somebody is an employee or a contractor is whether they supply their own equipment.

I am so sorry to say (because I know how much you want this) that you should NOT be happy to sign this contract. I'm sure they are patting themselves on the back for finding somebody so eager for a job that they are willing to put everything on the line by taking all the risk.

The tactic I would take with them is to tell them that you have assessed the contract and, wearing your CFO hat as if you were advising a client, these clauses are unacceptable. I would also say to them that you are amazed at their ingenuity at finding such a clever way to test your ability to assess risk, put the client's interests first, and undertake the appropriate level of due diligence into the matters presented. With a big smile tell them that you are confident that you have passed their final test so can they please send you the real contract now so that you can all get on with helping clients. Be prepared to walk away because the best is yet to come.

PS I run a bookkeeping business and the professional associations cover issues such as employing contract bookkeepers and what is allowed and what is not so private message me if you want to talk more on the phone.

Here is the ATO link about this: https://www.ato.gov.au/business/employee-or-contractor/

[ottg]

It is a consultancy contract, requiring me to obtain an Australian Business Number, etc, etc. It means the company shouldn't fall under the labour law and it means I will not get any super contributions during the 3 months.

As a contractor they have no obligation other than pay you for services delivered. This is standard and many companies go for this arrangement even in government.

The clauses are:

1) I agree to indemnify them against any losses, claims, suits, etc due to anything I do, although this should be covered under their PI insurance which, as per contract, will cover me as well

2) I agree to indemnify them against any costs arising from claims by the ATO. Presuming this is if ATO decides I am actually an employee and goes after them for SGC (superannuation guarantee charge) plus interest. I've already agreed to a drop of over 14% from the lowest salary point on salary, as well as forfeiting any super contributions.

3) I agree to take any insurances required by law including workers' compensation and public liability insurance. My understanding is this shouldn't affect me, but I don't know enough to agree to it.

4) although the contract agrees to them providing a variety of things, incl laptop, there is a clause saying I will provide all equipment and materials required for completion of services. I find this a little too open ended.

Any contractor should have professional indemnity insurance in place ( < $650 pa). Another option is to work through a labour broker (while this may be an issue as they would like to get a signup fee but worthwhile to investigate. They will have you covered.

Think about the bigger picture - in the end of the day its the local experience you want to put down on your CV for the next opportunity.

In your shoes I would go for it? It provides an income in $$ and the opportunity to build a network in your industry on somebody's else expenses while looking for the next opportunity.

[Fish]

"CXC Global provides a business structure that is set up and managed in accordance with Australian legislation. If you are paid as an individual contractor with CXC using our PAYG and Salary Packaging structures you have the safety and security of the APSI legislation (sometimes called ‘80/20’rule) not being applicable to your situation. If you choose to utilise CXC in combination with your own non-individual entity (such as Pty Ltd or trust), you will need to speak to one of our tax experts at CXC Financial Partners to ensure your arrangements are complaint with APSI legislation."

http://www.cxcglobal.com.au/contractors/faqs/

[DXB2OZ]

Thank you everyone for your responses. Such a wealth of information, I cannot tell you how much it is all appreciated.

Renegotiations will be happening on Tuesday - will let you know how I get on.

[OubaasDik]

"CXC Global provides a business structure that is set up and managed in accordance with Australian legislation. If you are paid as an individual contractor with CXC using our PAYG and Salary Packaging structures you have the safety and security of the APSI legislation (sometimes called ‘80/20’rule) not being applicable to your situation. If you choose to utilise CXC in combination with your own non-individual entity (such as Pty Ltd or trust), you will need to speak to one of our tax experts at CXC Financial Partners to ensure your arrangements are complaint with APSI legislation."

http://www.cxcglobal.com.au/contractors/faqs/

I was going to suggest CXC - I used them for about 3 years on another job and only have good things to say.

[RYLC]

Also run your details through the ATO Decider tool so that you can print it out and have it up your sleeve or even show them that they are wrong and have to remove the ATO clause from the contract and have to pay super. You can take whatever hourly pay rate you can live with, but they can't get out of paying super on top of that.

http://calculators.ato.gov.au/scripts/axos/axos.asp?CONTEXT=&KBS=GEC.xr4&go=ok

I'd also contact the labour hire firm mentioned above and see whether your contract could go through them so that everybody is covered. They will definitely know what is allowed and what is not.

Edited April 5, 2015 by RYLC

[DXB2OZ]

Thanks again, guys. Will contact CXC on Tuesday morning to explore options. Only going in Tuesday afternoon.

[OubaasDik]

Nice one, RYLC - you definitely seem to know what's what ....

[SurferMan]

DXb2OZ I can help you here, I had a similar situation.

1: Insurance would be required for most jobs. When I go via a contract house, they normally charge me 1-2% of my rate to cover me with their PI/PL insurance. Note this is way more expensive than getting it yourself, and it's tax deductable.

2: No chance. Tell them they need to assure you that they will apply with any and all applicable ATO laws.

3: Take out the insurance, it's your CYA.

4: On the equipment, make sure you cover this in detail, as to what they will provide, and you will provide. You don't want to have to say for example buy loads of expensive software, because they said you would provide all the tools.

The ATO has a simple means test to determine whether this is PSI (Personal Services Income) which from the sounds of things it is not.

[DXB2OZ]

What's CYA? Or is that a short form of "cover your ****"? ☺️

This is definitely PSI, whether I form an entity or not, it will be taxed at individual rates with deductions extremely limited.

I have definitely learned a lot through this process, which is a positive. Going to go in tomorrow in a spirit of reconciliation and see what solution we can come up with which either benefits both parties or doesn't overly s***w one party (namely me). Not to be too crass, but if I sign this contract as it stands, I fail to see how they could possibly respect me in the morning.

Fingers crossed!!

[RYLC]

Not to be too crass, but if I sign this contract as it stands, I fail to see how they could possibly respect me in the morning.

That's EXACTLY what I think DXB2OZ Looking like you are walking away can sometimes be the right thing to do because it sets the tone of how to treat you.

You want your message to be:

• I'm no fool
• I'm not green
• I'm not that desperate
• I'm dealing with this just as I would for a client (looking carefully at every clause)
• I can access resources and know how to research what I need to know
• I know my stuff
• Respect is a two way street!

All the best. Truly be willing to walk away. It will bode well for future negotiations with other agents that you weren't able to compromise your professional standards to accept a contract that you could not advise a client to do and chances are the current company will call your bluff and then come crawling back because that level of due diligence is what they need for their clients.

[Sunnyskies]

DXB2OZ, sometimes we as new comers are too conciliatory and trusting. As a person hiring staff I'm always amazed at how locals push back and demand things - so don't feel like you need to accept things.

As an aside, we do hire contractors on occassion as non-employees, but when it gets too tricky with insurance etc we simply hire them as fixed term employees. Makes little difference to us as employers - hiring a contractor as such can have advantages for both but if someone doesn't want that or can't meet our requirements to be a non employee then we simply go to plan b. The rate we pay doesn't change but we deduct tax and super rather than letting the individual do that, which they deal with if not an employee. The question for you would be whether the rate they are offering is still acceptable if they deduct super and tax.

[DXB2OZ]

Whatever else, I go in today armed with information, options, good ideas and support.

Thanks so much, everybody.

[SurferMan]

Thoughts and prayers with you DXB,

Head high if you please. I would not bow to them just for a job. Make sure you know where your boundaries are and don't budge. This is a classic of who blinks first.

[SurferMan]

C'mon DXB!

Tell us how you went today! Whose bringing the popcorn?

[DXB2OZ]

Ok, all offending clauses removed. With barely a murmur.

So while I didn't need to use the options I was given, it really gave me a massive confidence boost knowing I had alternatives up my sleeves.

Contract in process of being revised, so not signed yet, but no reason to think it won't be sorted.

Thanks guys, luv ya

[Sunnyskies]

Pleased you came right.

[Mara]

Don't you just love this forum and all its magic answers? Well done guys!