CHAPTER 4.1 EMPLOYMENT RELATIONSHIP CLASSIFICATIONS

4.1.1 There are three classifications which describe the relationship of an employed person to the business they work in, namely:

• Status in Employment,
• Employment Type
• Form of Employment

These are described below.


STATUS IN EMPLOYMENT

4.1.2 The Australian Status in Employment classification is based on the ILO's 1993 resolution concerning the International Classification of Status in Employment (ICSE-93). The ICSE classifies job holders according to the type of economic risk held between the job holder and other persons or legal organisations. The distinction between paid employment jobs and self-employment jobs is central to the classification. Paid employment (employee) jobs are those where remuneration is not directly dependent on the profits of the unit for which the job holder works. Self-employment jobs are those jobs where remuneration depends directly on the profits (or future profits) derived from the goods and services produced. The ICSE distinguishes five groups: employees (paid employment jobs) and four types of self employment jobs: employers; own account workers; contributing family workers; and members of producers' cooperatives.

4.1.3 The Australian Status in Employment classification classifies job holders according to their perception of the relationship between themselves and the enterprise for which they work, together with the legal status of the enterprise where this can be established.

The groups distinguished in the Australian classification are:

• employee - a person who works for a public or private employer and receives remuneration in wages, salary, a retainer fee from their employer while working on a commission basis, tips, piece-rates, or payment in kind; or a person who operates his or her own incorporated enterprise with or without hiring employees;
• employer - a person who operates his or her own unincorporated economic enterprise or engages independently in a profession or trade, and hires one or more employees;
• own account worker - a person who operates his or her own unincorporated economic enterprise or engages independently in a profession or trade, and hires no employees; and
• contributing family worker - a person who works without pay in an economic enterprise operated by a relative.

4.1.4 The legal status concept is used to classify owner-managers of incorporated enterprises as employees rather than as employers or own account workers, for consistency with Australian National Accounts practice (the Australian System of National Accounts). Individuals who work in their own business are queried about the legal status of the business. Although an individual may 'own' a business, if it is incorporated, the individual is employed under the account of the business, and is not held personally liable for the economic enterprise should it become insolvent. Those individuals who own (or part own) an incorporated business, with or without hiring one or more employees, are therefore classified as employees. If the business is unincorporated (and hence the owner is liable for the economic enterprise), then owner-managers who hire employees are classified as employers and those who do not are classified as own account workers.

4.1.5 The Australian Status in Employment classification is depicted in diagram 4.1.1.


4.1.6 The Status in Employment classification is available from most ABS household surveys producing estimates of employment, including the Labour Force Survey; supplementary surveys; and most Special Social Surveys. The status in employment classification is not available from business surveys producing estimates of employee jobs. However, as discussed in Chapter 3. Employment, estimates of employee jobs from business surveys are related to, but not the same as, estimates of persons in paid employment (employees) from household surveys.


EMPLOYMENT TYPE

4.1.7 Employment Type categorises employed people according to the nature of their employment relationship to the business or nature of their contract. Under the Employment Type classification, owner managers of incorporated enterprises (OMIEs) are separated from employees (whereas they are combined in the Status in Employment classification).

4.1.8 OMIEs have a legal identity distinct from their business. However compared to employees, OMIEs have greater autonomy in making decisions over employment arrangements such as setting of hours and determination of pay. Based on this, the Employment Type classification separates OMIEs from employees, and thus the Employment Type classification reflects the nature of the relationship to the business, i.e. as a business owner or working for someone else.

4.1.9 In the Employment Type classification, employees are further divided into those with and without paid leave entitlements (paid sick leave and/or paid holiday leave), while employers and own account workers are combined to form 'owner managers of unincorporated enterprises' (OMUEs).

4.1.10 Diagram 4.1.2 illustrates how Employment Type compares with status in employment.

Status in Employment	Employment Type
Employees	Employees with paid leave entitlements
	Employees without paid leave entitlements
	Owner-managers of incorporated enterprises
Employers	Owner-managers of unincorporated enterprises
Own account workers
Contributing family workers	Contributing family workers

4.1.11 The Employment Type classification is available from most ABS household surveys producing estimates of employment, including supplementary surveys: Forms of Employment Survey (FOES), Employee Earnings, Benefits and Trade Union Membership (EEBTUM); the Census of Population and Housing; and most Special Social Surveys.


FORMS OF EMPLOYMENT

4.1.12 Another classification which extends the employment type framework is known as the Form of Employment (FOE) classification. This classification was developed in 2008 following revised concepts relating to 'contract work' and the need to more precisely identify the group of employed people working as 'independent contractors'. The FOE classification identifies the following three groups of employed people.

Employees: People who work for a public or private employer and receive remuneration in wages or salary. Employees are engaged under a contract of service (an employment contract) and take directions from their employer/supervisor/manager/foreman on how work is performed.

Independent contractors: People who operate their own business and who contract to perform services for others without having the legal status of an employee, i.e. people who are engaged by clients, rather than an employer. Independent contractors are engaged under a contract for services (a commercial contract). The employment of independent contractors may take a variety of forms: for example, they may have a direct relationship with a client, or they may work through an intermediary. Independent contractors may have employees, however they spend most of their time directly engaged with clients or on client tasks, rather than managing their staff.

Other business operators are defined as people who operate their own business, with or without employees, but who are not operating as independent contractors. Other business operators are distinguished from independent contractors in that they usually 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. Other business operators spend little time working on client tasks with most of their time spent on managing their employees and/or business.

4.1.13 The FOE classification is depicted in diagram 4.1.3.



4.1.14 The FOE classification is available from the Forms of Employment Survey. Further information on the Forms of Employment Survey can be found in Chapter 21.3. Information about the methodology used to classify employed people using the FOE classification, and a comparison of the FOE and employment type classifications, can be found in Appendix 1 of Forms of Employment, Australia(cat. no. 6359.0).

4.1.15 Further information about these classifications, their comparisons and limitations was published in a feature article in Australian Labour Market Statistics, July 2011 (Cat. No. 6105.0).

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