INDEPENDENT CONTRACTORS


INTRODUCTION

In recent years, changes in the nature of employment relationships, changes to workplace relations laws, and the introduction of the Independent Contractors Act 2006, have resulted in an increased interest in the extent of independent contracting, and the working conditions of independent contractors. In light of this interest, the ABS reviewed its annual Forms of Employment Survey (FOES), revising the existing FOES concepts relating to 'contract work' to more precisely identify the group of employed people who work as independent contractors. These changes are reflected in the November 2008 FOES, which was released on 12 June 2009 (for more information see Forms of Employment, Australia, November 2008 (cat. no. 6359.0)).

Independent contractors are sometimes referred to as consultants or freelancers. The term 'contractors' is also frequently 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 FOES measure of independent contractors refers to people who are not employees, but who may be operating in a similar manner to employees.

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 (end note 1).

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 generally generate their income from managing their 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 million were independent contractors in their main job, making up 9% of employed people. A further 8.6 million people (81%) were employees (end note 2) 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. While employed people may be independent contractors in their main job 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.

2. Independent Contractors, Proportion within each age group - by Sex
	Males		Females		Persons
Age	'000	%	'000	%	'000	%
15-24	41.1	4.4	11.4	1.3	52.5	2.9
25-34	134.3	10.3	36.6	3.6	170.9	7.3
35-44	180.2	13.3	75.2	6.7	255.3	10.3
45-54	185.7	14.7	63.8	5.8	249.5	10.6
55-64	141.8	17.5	43.1	7.2	184.9	13.1
65 and over	44.0	24.3	*10.0	11.7	54.0	20.3
Total	727.0	12.4	240.1	5.0	967.1	9.1
* estimate is subject to sampling variability too high for most practical purposes
Source: Forms of Employment, Australia, November 2008 (cat. no. 6359.0).

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. 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. 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. 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 (23%) industry, 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).

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 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.

A higher proportion of male independent contractors usually worked part-time hours, with over one fifth (22%) usually working less than 35 hours per week, compared with 16% of male employees, and 13% of male other business operators. In comparison, over two thirds (67%) of women who were independent contractors in their main job worked part-time hours. Female employees and other business operators were less likely to work part-time hours, with around half of each group (47% and 53%, respectively) usually working less than 35 hours 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.

Independent contractors, as well as other business operators, were more likely to have some say in their start and finish times (84% and 89%, respectively) than employees (41%).


BUSINESS OPERATION

A small proportion of independent contractors utilised a third party to obtain work, with 2% having found their current job through a labour hire firm/employment agency, compared with 5% of employees. Of independent contractors, 4% were currently registered with a labour hire firm/employment agency in the reference week, compared to 7% of employees.

Almost two thirds (62%) of independent contractors reported that they had authority over their working procedures. Of those who reported not having authority over their working procedures, 30% reported that it was their supervisor who had that control, while a further 28% reported that it was the client contracted to. Independent contractors tended to be responsible for organising their own financial protection. Around four fifths of independent contractors organised their own liability insurance (87%), superannuation (90%), and workers compensation (85%).

Over three quarters (78%) of independent contractors did not have employees. Of the 22% of independent contractors who did have employees, most (90%) had less than 10 employees.

The average duration of employment in their current business for independent contractors was 6 years. Over one third (36%) of independent contractors had been working in their current business for over 10 years. In comparison, 48% of other business operators had been operating their business for over 10 years, while 20% of employees had had 10 years continuous duration of employment with their current employer.

Most independent contractors were able to work for multiple clients, with 73% reporting that they were usually able to work on more than one active contract. Despite this, only 46% of independent contractors had more than one active contract in the reference week, suggesting that for many independent contractors, working on one contract at a time may be preferable or provides sufficient income.

Almost two thirds (65%) of independent contractors were able to sub contract their own work. For those independent contractors who could not, the 'Nature of the work' was the main reason for not being able to sub contract their work, with almost two thirds (62%) of independent contractors reporting this reason, followed by 'Part of contract/conditions' (23%).


FURTHER INFORMATION

For further information about the Forms of Employment Survey, see Forms of Employment, Australia, November 2008 (cat. no. 6359.0). This publication is available free of charge on the ABS website <www.abs.gov.au>.

For further information about the information presented in this article, please contact Penny Boyd in Canberra on (02) 6252 5884 or email <penny.boyd@abs.gov.au>.


END NOTES

1. Phillips, K., 2008, Independence and the Death of Employment, Connor Court Publishing Pty Ltd, Australia

2. The 'Employees' group as defined for the purposes of FOES differs slightly from the 'Employees' group as defined within the monthly Labour Force Survey (LFS) (and other supplementary surveys). For more information see Forms of Employment, Australia, November 2008, ABS cat. no. 6359.0, Appendix 1.