VA business growth: What to know about engaging other contractors

As a VA business owner you know what’s involved in being a VA or OBM (Online Business Manager) for someone else but if the workload is increasing, what’s next for you? Will you close your books and turn that work away or will you get someone else in to assist you? Or, do you see the potential in expanding your service offerings by bringing on other contractors (or subcontractors) who have those skills?

We regularly see VA’s or OBM’s engaging other contractors to answer phones, administration tasks, graphic design, social media, video editing, email campaigns, software set up, website building and more.

If you have your own VA business in Australia, whether as a sole trader or otherwise, you will need to get familiar with how to do this properly and avoid issues with both the Australian Tax Office (ATO) and the Fair Work Commission (FWC). 

We don’t want you to be discouraged from bringing in other contractors or subcontractors. We want you to be informed so when it’s time, you’ll already have the information clear in your mind. Better to learn now than later on, right?

We’ll be covering:

• When engaging someone as a contractor might become illegal

• When contractors need to be paid superannuation

• How to ensure contractors are clear about your expectations; and

• How to protect your business from contractors poaching your clients

Let’s start with how someone engaged as a contractor might no longer be legally legitimate…

When a contractor is no longer legally a contractor

Contractors and subcontractors can be an appealing way of bringing in talent when compared to employees, as there are often less complications like superannuation, leave and worker’s compensation. However, that is a misconception because there are circumstances in which a contractor may legally be considered an employee, even if initially brought in as a contractor or subcontractor.

There are some specific rules that the ATO has put together to help people determine if they are engaging a contractor or if they should be hiring someone as an employee. Or, someone is currently engaged as a contractor but may be entitled to become an employee in some circumstances.

If that’s a bit confusing, the ATO provides a resource for comparison, to help you identify if you are bringing in  a contractor or employee. Getting it right is critical, to avoid penalties and potentially having to pay back costs such as superannuation.

Below are the 7 questions to ask yourself, to check if you are engaging a contractor or hiring an employee. It is important to note too, that if you are sourcing support from a person working offshore, these questions still apply.

Contractor	Employee
1. Can the person choose how, where and when the work is done? (subject to reasonableness)	Do you (the business) have the right to choose how, when and where the work is done?
2. Does the worker provide you a service? Does the work they do further their own business?	Does the worker perform the work as a representative of your business?
3. Is remuneration given when a specific result is achieved?	Is remuneration given in exchange for time, for an item or activity or for commission?
4. Is the worker able to delegate to others and choose who they will pay to complete the work?	Is the worker expected to complete the work themselves and not pay someone else to do what you have delegated as their work?
5. Does the worker provide their own tools, equipment or other assets needed to complete the job? Are they responsible for the costs and maintenance of these?	Will you provide the tools, equipment or other assets needed to complete the job? Will they be reimbursed for any costs incurred for providing what is needed themselves?
6. Is the worker responsible for any costs incurred or other damages that arise from injury or defect in their work?	Are you (the business) responsible for the costs arising from injury or defect in the person’s work.
7. The worker benefits from the goodwill any of their work generates.	You (the business) benefit from the goodwill any of their work generates.

Source: ATO

Finally, before hiring contractors of your own, it is important that you have a clear understanding of your own employment relationship with your client. Are you an employee or contractor? It is worth checking your own work conditions against the 7 questions above, rather than assuming that the current arrangement is correct. If you are a contractor, then you are free to hire a subcontractor to do work for you. If you believe you may be an employee under the conditions above, then you will need to seek legal advice, as employees are entitled to certain benefits, but are not able to hire contractors to help with their assigned workload.

When superannuation is payable

One aspect of hiring a contractor (or subcontractor) that is widely appealing, is that paying superannuation is not needed in the same way it is for an employee. This is not as straightforward as it may seem though, and getting it wrong could be costly.

Subcontractors who are paid mainly for their labour are legally entitled to superannuation, under the superannuation guarantee, same as an employee would be, they are considered a ‘contractor who is an employee for superannuation purposes’. If you remember from the 7 questions above, a contractor is paid for the completion of certain activities or tasks, that is, they are paid a certain amount to complete what is delegated to them, rather than for contributing time or skills to a task, completed or not.

One way to manage this is to include the superannuation payment amount within the fee payable to a contractor. This way, the superannuation contribution amount can be deducted from the agreed payment amount, ensuring you are not having to later increase your costs and potentially have to waste time and money finding a new contractor. But it is important to remember you need to pay the superannuation amount - once it goes to the contractor it does not dissolve your liability.

Ensure a mutual understanding of duties and hours of work

Your reputation and ability to deliver work to the standard you have become known for should not be compromised by subcontractors you hire. You will remain accountable to your clients for delivering work on time and to the standard required under your own contract. It is therefore critical that any contracts you use include sections for:

• Outline of duties

• Hours of work

• Communication methods and timeframes

In addition to ensuring you and your subcontractor are on the same page with regard to the above, allowing for the adjustment of expectations should also be included. This will mean that as your business continues to grow, you can increase the amount of work you delegate. You will also be able to adjust timeframes and hours of work as you need, so that you don’t end up with subcontractors with too little or too much work.

Prevent subcontractors subverting your own client-contractor relationship

Any subcontractors you hire are brought on to help grow your own VA business. It is important that the contract you use when hiring protects you from subcontractors going directly to the client to arrange work. This can not only damage your business reputation but also result in the loss of a client.

The converse situation is that a client could approach a subcontractor directly, offering them work without your permission as the Principal VA.

Having a contractual clause that prevents subcontractors and clients soliciting work without your permission can give you peace of mind and protect your business. It should also restrict solicitation for an explicitly stated time frame after any contracts are terminated.

Ready to start growing your VA business?

It can be both exciting and overwhelming when you begin the process of hiring contractors to grow your VA business. Getting it right is important for the protection of your business and to prevent costly repercussions.

We have created a VA contractor template specifically to be used by VAs like yourself, to protect your business and ensure you remain the Principal VA. As you go through and complete each section of the template, you will be guided through the key decision making processes including conditions of employment, duty descriptions, hours of work, communication expectations and limitations on contact with clients. It can be used for multiple clients once downloaded but should be updated within a reasonable timeframe, to ensure laws haven’t changed.

Grow your VA business with confidence, it’s not too late to start now.

Related Articles: 

Common mistakes business owners make when they hire contractors

How to hire an independent contractor

What every OBM needs in their Online Business Management Agreement

Employee or contractor – what’s the difference? And why you could be fined

If you are growing your VA business:

• Have a look at our VA Subcontractor agreement, to be used when hiring other VAs.

• As well as our VA Service agreement, to be used with clients.

Looking for another type of contractor or subcontractor agreement? Reach out to our team here for a template to suit you and your business type.

Ready to Boss Legal is a legal publisher. We are not a law firm and you acknowledge that by purchasing, downloading and customising this template, Ready to Boss Legal is not acting as your lawyer or providing you with legal advice. This article is legal information only and should not substitute for or constitute professional legal advice. We recommend you consult with a lawyer for legal advice, noting Ready to Boss Legal is a legal publisher and not a law firm. All copyright in this article belongs to Ready to Boss Legal. If you share it we ask that you acknowledge us as the source.