The article below is by DSC. Read the original article here.
One of the juiciest debates in the disability support sector right now is the discussion around the relative merits, risks, and considerations of the contractor model. Almost everyone connected to NDIS service delivery has an opinion about the contractor model for delivering face-to-face supports. I doubt a week goes by when I don’t hear from someone about how the contractor model is the purest synthesis of choice and control, or alternatively how it’s going to bring the sector to its knees. Here we present all sides of the debate.
What is the contractor model?
Pretty simply, it’s a model where support workers are independent contractors (with their own ABNs), and the provider doesn’t employ the workers but instead engages them as contractors. In these cases, the provider might be the independent support worker, a larger provider, or even a platform. This contrasts with the more traditional model where the support worker is employed by the provider.
The model is used more frequently in other services like support coordination, allied health, and therapy, but the controversy usually centres around supports like in-home services, personal care, and community access being delivered through a contractor model. Many people believe that these kinds of supports are higher risk, that participants depend more heavily on them, and that the consequences of failure are greater than with other services.
It’s also worth saying that the contractor model is used extensively in other sectors. A parliamentary research paper from 2018 put the number of contractors in Australia at just over one million (compared to 2.6 million casual employees), which had remained roughly stable over in the preceding decade. This is surprising given how much of my average credit card bill contains “Uber Eats”.
For purposes of the debate, there’s also a difference between independent contractors (i.e., independent support workers with an ABN, sending out their own invoices, and delivering support themselves) and contractor platforms, which are usually online and offer a place for independent contractors and participants to find one another other and connect, in exchange for a flat fee or percentage of the contractor’s hourly rate.
Somehow there’s been lots of, and not very much, research into contracting in our sector. Per Capita, a centre-left think tank, produced Contracting Care – the rise and risks of digital contractor work in the NDIS this year and was pretty clear in its opposition to contractor models for a number of reasons. Contractor models have also been highlighted in Joint Standing Committee Reports (here and here), and the University of NSW conducted some research (note: this isn’t an exhaustive list).
Difference between employees and contractors
The ATO publishes a list of the differences between contractors and employees. Importantly, it doesn’t matter whether the employee is full time, part time, or casual (although there are more nuanced technical differences between employer and employee obligations for these different employment types). The main differences highlighted by the ATO can be summarised as follows:
- In disability support provision, employees are paid primarily for their time worked. A pure contractor model can pay the worker based on an agreed quote for a job, regardless of time spent. Contractors are free to negotiate their own fees and working arrangements for each job.
- Employers take care of tax obligations (like super) on behalf of employees, whereas contractors bear these responsibilities themselves.
- Employees are provided with most of the equipment, insurance coverage, tools, and assets that they need to complete their work, whereas a contractor is expected to provide these things themselves.
- Employees take on no commercial risk (the risk lies with the employer), whereas contractors are responsible for the quality of their own work.
- Employees can be instructed on how to complete a job, whereas a contractor has freedom to complete the tasks required in a way they desire, subject to any specific terms in a contractor agreement.
- Employees are considered to be working within the employer’s business and thus have some general obligations to the employer along these lines. Contractors work for themselves.
It’s a matter of almost constant legal debate about whether a given worker is considered an employee or a contractor. There have been some court cases that have created legal precedents, while others were pursued solely for an individual worker to clarify the working relationship. So, the short answer as to whether a worker is an employee or contractor is… it depends, usually on a range of factors.
It is also worth mentioning sham contracting. This is where an employer intentionally classifies and treats a worker as a contractor even though the scope, terms, and nature of the relationship gives every indication of an employer-employee situation. Sham contracting is often used by an employer to avoid having to pay entitlements or provide the same protections that are an employee’s right. This is often the source of concerns about the “Uberisation of the disability support sector”. (Please ignore my previous comment about how much I use Uber Eats).
Benefits of the contractor model
Many participants execute choice and control by using the contractor model, whether they engage the worker directly or use a contractor platform. Proponents of this approach enjoy the freedom of a direct relationship with the worker rather than going through a traditional provider. It allows participants to ensure that support is provided how they want it and when they want it and allows them to take whatever risks they wish.
The model also has the potential to open the sector to a pool of workers who would otherwise not be available to commit (or interested in committing) to a traditional provider. Contracting usually allows workers to select the type of work they want to do and negotiate with the client on when and how they will deliver supports, and for what rate. Some see the contractor model as a key part of the future of sector workforce growth, as it is one way to ensure that support work is appealing to a wide range of potential workers and fits into people’s lives. And let’s be real: support work is very frequently low-paid work. For some workers, the benefits of being attached to a provider simply aren’t worth losing the cut of the hourly rate that the provider takes.
Many participants have been demanding for decades the chance to directly set the terms of the employment relationship, manage their own team, and direct their own supports. Now, participants can have it.
Risks and downsides
Even the most ardent advocates of the contractor model, however, acknowledge that it’s not for everyone. The same freedom it gives some people can be safeguarding risks for others. Traditional employment relationships put the burden of obligation for worker health and safety, suitable training, supervision, finding a replacement worker when the regular one is off sick, dealing with incidents, and the like on the employer. In a contractor relationship, the bulk of these obligations sit with the worker (although the responsibility to find a new worker really falls to the participant, which will be a significant challenge for some).
So it’s largely “buyer beware”. In this case, the buyer is the NDIS participant – which is fine, if the participant is fully informed of and confident about the risks, benefits, and mitigation strategies that are available. But we know that not everyone is a fully informed consumer. It’s also worth noting that the NDIS Commission does require that some safeguards be in place for all workers providing NDIS supports, contractor or otherwise.
If an independent contractor is unregistered, that can come with its own risks. Only 1% of workers who have gone through the NDIS Commission Worker Screening check are from unregistered providers. If an unregistered provider hasn’t done the check, that certainly doesn’t mean they are evil, out to harm participants, and wouldn’t pass it if they applied – it just means there’s currently not enough of an incentive to treat it as more than something “nice to have”.
Traditional providers (that employ workers) have been some of the most vocal critics of this model. Imagine going through the cost and stress of recruiting, interviewing, selecting, onboarding, training, and supervising a fantastic worker … who then resigns to work as a contractor directly with a participant you (used to) support. It’s a double whammy.
There are also risks to all parties if contractors don’t keep on top of their tax and super obligations (and the ATO routinely cracks down on this). In other contractor-heavy sectors, the tax authorities have retrospectively audited and claimed back years of contributions, and in some cases pursued penalties and charges.
The threshold for answering the question, “is this worker an employee or a contractor?” is frequently shifting, moving, and evolving. A big part of the reason is how employment models evolve over time to match our changing world. The NDIS market is (should be?) fluid enough to move to meet market demand and reflect modern employment models. Many people also feel that the modern industrial relations system has not kept pace with innovative social policy like the NDIS.
But there’s no getting away from the fact that direct support workers are doing a job that puts them in frequent in-person contact with people who are likely to be more vulnerable. The Productivity Commission has already started looking closely at whether there should be a policy of prioritising direct employment for aged care workers. I wouldn’t be surprised if the current government also took a good look at the role of the contractor model in the disability support sector.
The bottom line is that keeping people safe while honouring hard-fought choice and control is a complex beast. The present situation has no easy answers. A big challenge in the current debate is that people are so clearly on one side of the fence or the other, which only serves to entrench views more deeply. At some point, we must all acknowledge that the unique NDIS market has created a demand for these kinds of models and get to the point where we can have a reasonable debate.