Labour Hire Contractor vs Casual Employee in Victoria

Whether a worker supplied through labour hire should be an ABN contractor or a casual employee is decided by how the work is actually done, not by what the paperwork says. Since 26 August 2024 the Fair Work Act looks at the real substance and practical reality of the whole working relationship. A person who works the hours they are given, under your supervision, with your equipment, doing tasks that are part of your operation, is very likely an employee, whatever their ABN says. Getting it wrong can mean sham contracting penalties, back pay, unpaid superannuation and WorkCover exposure.

This article is for site managers and operations managers at civil contractors, manufacturers and warehouses deciding how labour hire crews should be engaged. It compares the two models, covers who carries which obligations, and sets out when each one genuinely fits. It is general information, not legal advice.

The test

How the law tells them apart

The label in the contract is a starting point, not the answer.

Whole of the relationship

The Fair Work Act now directs attention to how the arrangement works in practice, including control over how and when work is done, whether the worker can delegate or subcontract, who supplies tools and equipment, how the worker is paid, and whether they run a business of their own.

Control is the strongest signal

If your supervisor tells the worker where to be, what to do next and when to knock off, that points strongly to employment. Genuine contractors agree a result and decide how to deliver it.

Sham contracting is a civil offence

Misrepresenting an employment relationship as an independent contract is prohibited. The defence requires the business to have reasonably believed the arrangement was a genuine contract, so assuming it was fine is not enough.

Casual has its own definition

A casual employee is one who has no firm advance commitment to continuing and indefinite work. Casuals receive a loading instead of paid leave, and after six months (twelve for small businesses) can choose to move to permanent employment if their work has become regular.

Two site workers in hard hats checking a clipboard and speaking on a two way radio

Side by side

Who carries what

How the main obligations usually fall when a worker is supplied through a labour hire provider.

Wages

Casual: paid by the provider at the award or agreement rate with casual loading. Contractor: paid against invoices at an agreed rate

Superannuation

Casual: the provider pays it. Contractor: payable anyway if the contract is wholly or principally for the person’s labour

WorkCover

Casual: covered by the provider’s policy from the first shift. Contractor: arranges their own cover, though Victorian law can treat some contractors as workers

Tax

Casual: PAYG withheld by the provider. Contractor: manages their own tax and GST

Safety

Both: the host shares safety duties for everyone working on its site, whatever the engagement model

Misclassification risk

Casual: low when paid correctly. Contractor: high where the person works under direction like an employee

Fit

When each model genuinely suits

Casual employee: general labourers on civil crews, pickers, packers, storepersons and process workers, and anyone who will work set hours under your supervision as part of your team.
Casual employee: short notice cover and peak season ramps, where people are slotted into an existing roster and directed by your leading hands.
ABN contractor: an operator who brings and runs their own machine or truck, quotes the job, carries their own insurance and could send someone else to do it.
ABN contractor: a specialist delivering a defined result, such as a particular installation or a fixed scope, who controls how it is done and works for several clients.
Warning sign: a worker with an ABN who works only for you, full days, under your foreman, with your tools. That arrangement is likely to be employment in substance.

On manufacturing lines and in distribution centres, the work is almost always directed, rostered and done with the host’s equipment, so casual employment is the normal fit. Civil sites have more genuine contractors, mostly owner operators of plant.

Cost

Why the cheaper looking option can cost more

An ABN rate often looks lower than a casual charge rate because the contractor rate does not visibly carry superannuation, WorkCover, payroll tax or casual loading. If the arrangement is really employment, those costs have not gone away. They have become a liability that can surface later as an underpayment claim, an unpaid super assessment, a WorkCover dispute after an injury, or a sham contracting investigation.

The host is not shielded by the fact that the worker came through a provider. Hosts share safety duties for every worker on their site, and a host that knowingly takes part in an arrangement built to avoid employee entitlements can be drawn into it. In Victoria the host must also only use a provider licensed by the Labour Hire Authority, whether the people supplied are employees or contractors.

The practical approach is simple. Describe the work honestly to your provider: who will supervise it, whose tools and equipment will be used, the hours and how long the job will run. A good provider will tell you which model fits and why, and will not offer an ABN arrangement just because it prices lower. Then check that what happens on site matches what was agreed, because the substance of the relationship is what counts.

Bluestone Labour Group engages workers both ways. Casual employees are on our payroll under the relevant award, with WorkCover and superannuation from their first shift. ABN contractors are engaged where the work genuinely suits it, and we will say so when it does not. We hold Victorian Labour Hire Licence VICLHL11535. See civil labourer hire, plant operator hire and warehouse staff hire for the crews we supply, and our guide to same job same pay for how charge rates are affected where an order applies.

Questions

Frequently asked questions

Yes, where the work is genuinely run as a business: the person controls how the work is done, can delegate it, supplies their own equipment and works for others. A worker who is directed and supervised like an employee is likely an employee, whatever the contract says.

Possibly. Under superannuation guarantee law, a contractor paid wholly or principally for their labour under a contract is treated as an employee for super purposes. When workers come through a labour hire provider, that obligation sits with the provider that engages them.

Sham contracting is misrepresenting an employment relationship as an independent contracting arrangement, or pressuring an employee to become a contractor to do the same work. It is prohibited under the Fair Work Act and carries civil penalties.

Casual employees can choose to move to permanent employment with their employer after six months (twelve months for a small business employer) if their work has become regular and they no longer meet the casual definition. For labour hire workers, that employer is the provider, not the host.

See all labour hire services

Contractor or Casual Employee, Which Engagement Model Suits Your Project