Offshore virtual assistants: what every small business owner in Australia needs to know

As small business owners, many of us rely on offshore contractors like virtual assistants, paralegals, customer support staff and administrative staff to keep things running smoothly. It’s cost-effective, flexible, and has become the way we scale our businesses without breaking the bank.

But a landmark decision from the Fair Work Commission (FWC) has thrown a massive spanner in the works. The metaphorical spanner? Hiring offshore doesn’t automatically protect you from Australia’s workplace laws. If you treat someone like an employee, even if they’re overseas and called a contractor or a Virtual Assistant (VA), they may be considered an employee under Australian law. This has huge consequences for Australian business owners.

Below I unpack the case, why it matters for your business, and what you need to do to stay on the right side of the law.

The landmark offshore VA case: Pascua v Doessel Group Pty Ltd

In Pascua v Doessel Group Pty Ltd [2024] FWC 2669, a Queensland business hired a paralegal, Joanna Pascua, based in the Philippines. On paper everything looked fine. Joanna was engaged as a contractor and paid AUD $18 (around 640 Philippine pesos) an hour and had an independent contractor agreement. She was given a company phone and computer.

But the reality? That is where things got messy. Joanna actually:

• worked fixed hours exclusively for the business that hired her (8.30am – 5pm in the businesses time zone);

• was fully integrated into the team with a firm email and regular zoom meetings; and

• was directed and supervised exactly like a permanent staff member.

When Joanna’s engagement was terminated by email (allegedly for copying company information), she lawyered up and lodged an unfair dismissal claim with the FWC in Australia.

The outcome? The Commission ruled that she was actually an employee under Australian law, despite living in the Philippines. She was entitled to unfair dismissal protections and backpay which would include a wage of at least $24.87 per hour.

Doessel Group appealed, but in February 2025, the Full Bench upheld the decision.

Why this matters for YOUR business

This isn’t just legal drama, it’s a wake up call for all Australian businesses, confirming three game changing realities:  

Reality #1: the Fair Work Act can apply to overseas workers. Even if they don’t live in and have never been to Australia.

Reality #2: a contractor agreement, even through a company, doesn’t automatically mean your hire will be considered as a contractor if the relationship looks and feels like employment.

Reality #3: sham contracting penalties can hit hard and include penalties, backpay and unfair dismissal claims. \

This applies whether you hire:

• a VA in the Philippines,

• a paralegal in India,

• or a local contractor here in Australia.

The location doesn’t matter. It is the relationhip that matters.

Contractor or employee?

The Joanna Pascua case makes it crystal clear, you need to get the classification of your team members right from day one. Are they an employee or are they a contractor?

The golden question the courts and Fair Work Commission look at is, “is the worker serving In my business or providing services TO my business?”

Here are the key factors that determine the answer:

• Control – If you’re directing how, when an where work gets done, you’re looking at an employment relationship. A genuine contractor controls their own work methods and schedule.

• Integration – Employees are part of the team with company emails, software logins and “team member” profiles and status on your website. Contractors stay separate.

• Pay structure – Employees get paid by time or commission. Contractor typically get paid for outcome or by fixed fee.

• Autonomy and delegation– Employees do the work themselves. Contractors can delegate or subcontract to others.

• Business risk – You bear all liability for employee mistakes. Contractors carry their own risk and costs for fixing problems.

• Goodwill – employee work builds goodwill for your business. Contractor work builds goodwill for theirs.

If you’re seeing lots of control and integration with no delegation allowed, you’re drifting into employee territory - especially if your business bears all the risks when something goes wrong.

What you need to do right now

Time for action. Once you’ve figured out whether your hire is truly a contractor or actually an employee, you have two paths forward.

Path 1 – ensure they are a contractor and hire them properly; or

Path 2 – accept they are an employee and put the right arrangements in place.

Path 1: keep them as a contractor (but do it right)

If your hire is genuinely a contract, great! You can still hire contractors and VAs, whether offshore local, but make sure you follow these rules:

Structure the arrangement properly

The first thing to do is structure the arrangement carefully. Ideally, you should always:

·       Contract with the contractor’s company rather than the contractor as an individual. This will give you an extra layer of protection;

·       allow the contractor to delegate tasks to another person and allow them the freedom to do the work on their own schedule;

·       pay per project or milestone, not fixed weekly or daily hours.

·       don’t integrate them into your internal team communications or branding, keep them separate and if you must share them on your web page you should say you “partner with” their business.

·       allow them to work for others, exclusivity screams “employee”.

The second thing you need to do is make sure you use the right documents:

·       Offshore contractors: for an offshore contractor consider an international contractor agreement, designed specifically for offshore arrangements and consider issues like data storage, security and where any dispute would be resolved if one were to arise. For example, in court in Australia or in court in the Philippines.

·       Local contractors: for local Australian VAs and contractors you need an independent contractor agreement drafted specifically for Australian law.

Finally, be brutally honest. If what you really want is someone working fixed hours, reporting to you daily, and being part of your team, then you may need to bite the bullet and hire them as an employee.

Path 2: hire them as an employee

 If your analysis of the hire points to employment, embrace it and do it properly. We have some tips for hiring employees living in Australia in our small business hiring guide.

Where your prospective employee is offshore, consider engaging an Employer of Record (EOR) like Smart Outsourcing Solution or Globalization Partners to manage the relationship. An Employer of Record is a third party company that acts as the legal employer for another company’s workers in that country. The EOR handles all local employment issues like payroll, taxes, employee benefits and contract management.

Practical takeaways for business owners

I am not trying to scare you away from hiring offshore help – it can be brilliant for your business. But you absolutely cannot assume that going offshore means you can dodge Australian workplace laws. The Fair Work Act might still apply, and ignorance is not a defence.

If you do one thing next after reading this article, it would be to review your current arrangements. If you’ve got VAs or contractors working fixed hours and integrated into your team, they probably fail the contractor test. If they’re likely employees, err on the side of caution and formalise that relationship properly.

Either way, protect yourself. Get the right agreement in place, one that reflects the true hiring relationship. And if you are unsure, get advice from your accountant or lawyer.

This stuff matters too much to get it wrong.

Need contractor agreement or employment agreement templates? We have more info over at our employment law hub here.