FEATURE ARTICLE 1: INDEPENDENT CONTRACTORS

Independent contractors are sometimes referred to as consultants or freelancers. The term 'contractors' is also used, however this is a broad term that is often used to describe people with a variety of forms of employment, for example, not only true independent contractors, but also employees engaged in short-term or fixed-term work, often engaged through a third party (e.g. a labour hire firm/employment agency). The measure of independent contractors used in this article refers to people who are not employees, but who may be operating in a similar manner to employees, and comes from the ABS Forms of Employment Survey (FOES) (6359.0).

In FOES, independent contractors are defined as those who operate their own business and who contract to perform services for others without having the legal status of an employee, that is, they are engaged by a client under a commercial contract, rather than as an employee under an employment contract. Thus, independent contractors have the same rights as their clients under common law to control the terms of the contract.

FOES also identifies two other groups of employed people: employees; and other business operators. Employees are those who work for a public or private employer and receive remuneration in wages or salary. They are engaged under a contract of service (an employment contract) and take directions directly from their employer on how the work is performed. Other business operators are employed people who operate their own business but are not operating as independent contractors. They are distinguished from independent contractors in that they usually generate their income from managing staff or from selling goods or services to the public, rather than providing a labour service directly to a client.


Overview

In November 2008 there were 10.7 million employed people aged 15 years and over in Australia. Of these, 1.0 million were independent contractors in their main job, making up 9% of employed people. A further 8.6 million people (81%) were employees in their main job, while 1.1 million (10%) were other business operators in their main job. A further 100,000 employed people who were multiple job holders and who were not independent contractors in their main job were independent contractors in their second job. Therefore, the total number of employed people working as independent contractors in November 2008 was 1.1 million, or 10% of all employed people. While employed people may be independent contractors in their main or second job, the remainder of this article focuses on those employed people who were independent contractors in their main job.

Age and sex

Men were more likely to be independent contractors, with 12% of employed men working as independent contractors in their main job, compared with 5% of women, and across all age groups there were proportionally more men who were independent contractors than women. Consequently, men made up the majority of independent contractors (75%). Around half of independent contractors (50% of men and 58% of women) were aged 35-54 years.

The proportion of independent contractors increases with age, with just 3% of 15-24 year old employed people working as independent contractors, compared with 20% of those aged 65 years and over (graph 8.24). This indicates that once people pass the traditional retirement age, they may move from being in employee positions to operating their own businesses, for example, as consultants. This may be due to their ability as independent contractors to choose the hours and conditions under which they work, particularly as part of a transition to retirement.


Occupation and industry

Male independent contractors were most likely to be Technicians and trades workers, with over one third (36%) employed in this occupation (graph 8.25). In comparison, 24% of the total male employed population were Technicians and trade workers. Female independent contractors were more likely to be Professionals, with 32% of female independent contractors working in this occupation, compared with 24% of the total female employed population who were employed as Professionals.

Male independent contractors were most likely to be found operating their business in the Construction industry, with over two fifths (41%) working in that industry (graph 8.26). Almost two thirds (62%) of these men were employed as Technicians and trade workers, and a further 17% as Labourers. The highest proportion of female independent contractors was found in the Professional, scientific and technical services industry (23%), with over half (52%) of these women working as Professionals and over one third (34%) working as Clerical and administrative workers. It should be noted that the industry of independent contractors reflects the industry of the independent contractors' business, rather than the industry of their client.

Hours worked

The working hours of independent contractors in their main job varied from other forms of employment. The average usual hours worked by male independent contractors was 44 hours per week, which was higher than that of employees (41 hours), but lower than that of male other business operators (49 hours). Female independent contractors, however, worked fewer hours (27 hours) than both female employees and other business operators (both 33 hours) (graph 8.27).

People who operate their own business tend to work longer hours than those who are employees. Over one third (36%) of male independent contractors and over half (53%) of male other business operators usually worked 49 hours or more, compared with just 18% of employees. Like men, female other business operators were most likely to work longer hours, with over one fifth (21%) usually working 49 hours or more per week.


Working patterns

The days on which independent contractors worked varied from those engaged in other forms of employment. Over half (55%) of male independent contractors worked weekdays only. In contrast, over two thirds (69%) of employees and less than half (43%) of other business operators worked weekdays only. Female independent contractors were more likely than male independent contractors to work on weekdays only, with two thirds (66%) working only on weekdays. Like men, a large proportion (70%) of female employees worked weekdays only, while about half (51%) of other business operators worked weekdays only (graph 8.28).

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