Contractor or employee? Sham contracting and WHS check
Answer eight questions about how the work really happens to see whether the signs point to employment or genuine contracting, the sham contracting penalties, and your WHS duty in either case.
Figures checked 5 November 2026. Free to use, no sign-in.
What the signs point to
Signs of employment vs genuine contracting
Answer at least 4 questions
- Employment signs
- 0
- Contracting signs
- 0
- Unsure
- 8
Your WHS duty either way
Either way, your safety duty applies: a contractor is a “worker” (s 7) and you owe them the primary duty of care (s 19 of the Work Health and Safety Act 2011 (NSW)).
Sham contracting maximum penalties (per contravention, from 1 July 2026)
- Individual
- $21,840 (60 penalty units)
- Business with fewer than 15 employees (body corporate)
- $109,200 (300 penalty units)
- Other body corporate
- $546,000 (1,500 penalty units)
The defence
It is a defence to the misrepresentation contravention (s 357) if the business reasonably believed the arrangement was a contract for services, having regard to its size and nature.
- Whether someone is an employee depends on the real substance and practical reality of the whole relationship (Fair Work Act s 15AA). No single sign decides it, and this check doesn’t decide it either.
- An ABN or a contract that says “contractor” doesn’t settle the question on its own.
General information, not legal advice.
How this works
Each answer counts as a sign of employment or of genuine contracting, using the indicators the Fair Work Ombudsman lists: control over the work, hours, how the worker presents, the right to delegate, tools and equipment, payment for results, commercial risk and other clients. With at least four answers, 75% or more pointing one way gives that result; anything in between is mixed.
Unsure answers are left out. The result is a guide to the evidence, not a legal finding: courts weigh the whole relationship.
Legal basis
- Fair Work Act 2009 (Cth) s 15AA (meaning of employee), ss 357–359 (sham arrangements), s 539
- Fair Work Ombudsman: sham contracting
- Work Health and Safety Act 2011 (Cth), model wording: ss 7 and 19
- Occupational Health and Safety Act 2004 (Vic) s 21(3)
Checked against these sources on 5 November 2026. Spotted a figure that looks wrong? Tell us.
Questions
What is sham contracting?
Treating someone who is really an employee as an independent contractor: misrepresenting the relationship (s 357 of the Fair Work Act), dismissing an employee to re-engage them as a contractor (s 358), or making a knowingly false statement to persuade them to become one (s 359).
What are the penalties for sham contracting?
From 1 July 2026 the maximum is $21,840 per contravention for an individual, $109,200 for a business with fewer than 15 employees and $546,000 for other businesses, as civil penalties. The worker can also recover unpaid entitlements.
How is employment decided now?
Since 26 August 2024 the Fair Work Act looks at the real substance, practical reality and true nature of the whole relationship, including how the contract works in practice, not only its written terms (s 15AA).
Do I owe a contractor a WHS duty?
Yes. Contractors and their employees are workers under the WHS Act, so you owe them the primary duty of care for work you engage, influence or direct. In Victoria the employer’s duty extends to independent contractors for matters it controls.
Related tools
All toolsQuestions the calculator can’t answer?
Workfloor answers pay, award, leave and termination questions for your team, with the Fair Work Act section or award clause behind each answer.