Hello {{First name | there}},
Welcome to another issue of The Employers’ Briefing – short insights and guidance on employment, safety and business disputes for Australian employers.
In this issue:
📌 Quick updates – The Fair Work Ombudsman recovers $453 million in unpaid wages; NSW introduces a new “comply or justify” model for WHS Codes of Practice; and significant changes to workers’ compensation claims for psychological injuries take effect in NSW.
⚖️ The Long Read – Why a genuine independent contractor may still trigger superannuation and payroll tax obligations, and the three separate tests employers need to consider.
✏️ From my desk – Apparently simple employment questions increasingly need to be considered from several different angles.
Let’s get into it ⬇️
Quick Updates
The Fair Work Ombudsman recovers $453 million in unpaid wages
The Fair Work Ombudsman recovered $453 million in unpaid wages and entitlements for more than 181,000 workers during the 2025-26 financial year. According to the Ombudsman, this represents an increase of approximately $95 million, or 27%, compared with the previous financial year.
The figures reflect the continued regulatory focus on workplace compliance and wage underpayments across Australia.
👉 For employers: payroll compliance remains a significant enforcement risk. Employers should ensure that their payroll, record-keeping and employment practices are regularly reviewed, particularly where employees are covered by modern awards or other instruments that create complex payment obligations.
Compliance with WHS Codes of Practice is now mandatory in NSW
Work Health and Safety (WHS) Codes of Practice provide practical guidance on how businesses can meet the standards required under WHS legislation in relation to particular workplace hazards and risks.
NSW has now introduced a “comply or justify” model. Businesses must either comply with an applicable Code of Practice or, where they depart from it, be able to demonstrate that they have managed the relevant hazard or risk to a standard that is equivalent to or higher than the standard required by the Code.
👉 Why it matters: businesses should identify which Codes of Practice apply to the hazards and risks present in their workplace and review their existing WHS systems against those Codes. Departing from an applicable Code will now require the business to be able to justify that its alternative approach achieves an equivalent or higher standard.
NSW tightens workers’ compensation rules for psychological injuries
From 1 July 2026, significant reforms to the NSW workers’ compensation scheme have made it more difficult to establish claims for primary psychological injuries. Among other changes, a worker must now establish that the injury was caused by a prescribed “relevant event”, that there is a real and direct connection between that event and the worker’s employment, and that employment was the main contributing factor to the injury.
The reforms also introduce stricter evidentiary requirements and higher thresholds for ongoing weekly benefits and common law damages, although important exclusions apply to particular workers and claims.
👉 Takeaway: psychological injury claims in NSW will now be subject to more stringent eligibility and causation requirements. Employers dealing with new claims should carefully consider whether the claim satisfies the new statutory requirements, while continuing to manage psychosocial hazards in accordance with their separate WHS obligations.
The Long Read
When must a business pay super to a contractor? Employment law, superannuation and payroll tax explained
A genuine contractor may still attract superannuation and payroll tax obligations
A business may need to pay superannuation contributions for a genuine independent contractor. Payments to that contractor may also be subject to NSW payroll tax. Employment law, superannuation and payroll tax each have separate tests, so businesses should consider at least three questions when engaging contractors:
Is the worker actually an employee for the purposes of employment law?
Even if the worker is a genuine contractor, is the business required to make superannuation contributions?
Are payments to the contractor subject to payroll tax?
Importantly, these questions are governed by different rules. A contractor arrangement can therefore create liabilities even where the worker is not ultimately found to be an employee.
1. Is the worker an employee or a contractor?
A business engages an individual as an independent contractor. They have an ABN, submit invoices and have signed a contractor agreement which expressly states that they are not an employee.
Is that enough? Not necessarily.
Under s15AA of the Fair Work Act 2009 (Cth), the question is now determined by considering the “real substance, practical reality and true nature” of the relationship.
This requires consideration of the totality of the relationship - including both the terms of the contract and how the arrangement operates in practice.
In practice, factors that courts will look at include:
the degree of control over the work;
who bears the financial risk;
who supplies tools and equipment;
whether the worker can delegate or subcontract; and
working hours and the expectation of continuing work.
No single factor is necessarily decisive. Having an ABN, issuing invoices or signing an agreement describing someone as an “independent contractor” does not, by itself, make them one.
If the relationship is in substance one of employment, the consequences can extend well beyond changing the worker's title. The business may face claims for employee entitlements that were not provided, potentially including minimum wages, leave and other entitlements under the National Employment Standards or an applicable modern award. Misrepresenting an employment relationship as contracting can also amount to unlawful sham contracting.
2. When must a business pay superannuation to an independent contractor?
Superannuation may still be payable for a genuine independent contractor. The definition of “employee” under the Superannuation Guarantee (Administration) Act 1992 (Cth) (SG Act) is broader than the ordinary employment law concept. Relevantly for present purposes, that definition includes certain contractors.
In particular, under s 12(3) of the SG Act, if “a person works under a contract that is wholly or principally for the labour of the person”, that person will be treated as an employee for superannuation purposes - even if they can otherwise be correctly classified as an independent contractor.
In effect, the test under s 12(3) of the SG Act has three limbs:
there must be a contract;
the person providing the labour is a party to the contract in their individual capacity (so if the engagement happens via a company or a partnership the test is not satisfied); and
the contract is principally or wholly for that person’s labour.
The test will not be satisfied if:
the contract leaves the person free to delegate, subcontract or assign the work;
the contract is for the provision of a result and the person is paid for the result; or
the contract is not principally for labour (for example, it is for the provision of equipment).
If the SG Act test is satisfied, a business can correctly classify someone as an independent contractor for employment law purposes and still have an obligation to make superannuation contributions for them.
3. When are contractor payments subject to payroll tax in NSW?
Payroll tax, which is regulated at a state and territory level, adds another layer.
For example, in NSW, payments to independent contractors can be subject to payroll tax under the “relevant contract” provisions of the Payroll Tax Act 2007 (NSW).
Broadly, under those NSW provisions, where a contractor provides the business with the services of a worker under a relevant contract, the contractor can be deemed an employee and the recipient of the services deemed an employer for payroll tax purposes.
There are important exemptions under the NSW provisions - including, in particular circumstances, where services are provided for limited periods, where the contractor ordinarily provides similar services to the public, or where two or more people perform the work.
But the important point is that payroll tax liability does not depend solely on the worker first being found to be an employee. Revenue NSW expressly warns that payments to independent contractors may be taxable even where the worker is not a common law employee or operates through a company or trust.
What should businesses check when engaging contractors?
Calling someone a contractor is the beginning of the analysis, not the end.
Businesses using contractors should consider the arrangement through three separate lenses: employment law, superannuation and payroll tax. The review should cover both the contractor agreement and how the arrangement operates in practice.
From my desk
One recurring theme in employment law is that apparently simple questions increasingly require consideration from several different angles.
Contractor arrangements are a good example. Whether someone is an employee is only one part of the analysis: superannuation and payroll tax obligations can arise under different tests and produce different outcomes.
For employers, this makes periodic reviews increasingly important - particularly where arrangements have been in place for some time and may have evolved in practice.
Thanks for taking the time to read this edition of The Employers’ Briefing.
If you think someone in your network would find it useful, feel free to share the subscription link.
Until next time,
This publication is for general information only and is not legal advice. It should not be relied on as such. Obtain legal advice specific to your circumstances before acting on its content.