If you’re a salon owner with freelancer hairdressers in your salon, or you are a freelance hairdresser renting a chair, this is a must read.
By Sandy Chong – CEO of the Australian Hairdressing Council
New Fair Work legislation around contractor or employee status
In the ever-evolving beauty industry, the distinction between employees and independent contractors (or freelance hairdressers as call often say) has become a focal point for salon owners, especially with the introduction of the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023. This landmark legislation aims to tighten the definitions surrounding employment status, a change that holds significant implications for salon owners and freelance hairdressers alike. Understanding these amendments is crucial for maintaining compliance, fostering a fair work environment, and ensuring the sustainability of salon operations amidst changing legal landscapes.
The Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 represents a pivotal shift in the Australian workforce landscape, specifically aimed at clarifying and tightening the definitions that distinguish between employees and independent contractors (freelance hairdressers). This legislative update introduces a definition of employment into the Fair Work Act which will be relevant to the test of determining whether someone is a true independent contractor, or an employee.
Importantly, the test must be determined by “ascertaining the real substance, practical reality and true nature of the relationship” between the worker and the business that engages them. This means there will be a shift from how the law currently operates (which just assesses whether someone is a true contractor by looking at the terms by which they are initially engaged), to assessment of the relationship as a whole – including how the parties work together after the contract has been formed.
The core intent is to close existing loopholes that have allowed for the misclassification of workers, ensuring that individuals receive their rightful employment protections and benefits. For salon owners, this means more scrutiny of their working arrangements with freelancers to ensure compliance.
The amendments introduced by the legislation will mean that the traditional multi-factorial test used to evaluate the nature of employment relationships will be applied to the whole of the engagement and will consider factors such as the degree of control over work (what services are offered and how they are priced), the ability to subcontract, the provision of tools and equipment (read professional products like colour and hair care), the method and manner of payment, the degree of financial risk, and the level of independence. These criteria provide a framework for determining employment status, safeguarding workers’ rights, and delineating employer responsibilities.
The multi-factorial test has been established by courts over time and provides a comprehensive approach designed to better distinguish between employees and independent contractors ( freelance hairdressers ). This test evaluates several key factors:
- Degree of Control: Examines how much influence a salon owner has over the work of a hairdresser, including work hours, and how services are provided. High control levels suggest an employee relationship.
- Ability to Subcontract: Considers whether hairdressers can delegate their work to their own employees or sub-contractors, if so, it leans towards a contractor status.
- Provision of Tools and Equipment: Looks at who provides the necessary tools for the job, which includes professional and retail products such as colour and hair care . Freelancers typically supply their own, indicating independence, while provided tools and products suggest employment.
- Method of Payment: Distinguishes between being paid per job or service by the customer (contractor) versus a regular wage by the employer (employee). It’s also very important whether the freelancer has their own payments system.
- Degree of Financial Risk: Assesses who bears the cost of business risks, like unsatisfied clients. Contractors usually absorb these risks, while employees do not.
- Level of Independence: Measures how much autonomy the hairdresser has over their work, including setting prices, services offered, and using their own booking system. Greater independence supports contractor status.
Understanding and applying this test is crucial for salon owners to ensure their working arrangements comply with new legal standards, safeguarding against the misclassification of workers.
The Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 has significant implications for salon owners, particularly those who engage with freelance hairdressers. This legislation necessitates a reevaluation of how salon operations and worker relationships are structured, emphasising the need for compliance with updated employment classifications. Salon owners must now scrutinise their working arrangements with freelancers to ensure they support the view they are genuine contractors in light of the multi-factorial test criteria. This involves assessing control levels, subcontracting abilities, tool and equipment provision, payment methods, financial risk responsibilities, and the degree of independence allowed.
Compliance with this legislation means salon owners may need to adjust their business models. For instance, ensuring freelancers have the autonomy to use their own booking and payment systems and supply their own tools and products becomes crucial in distinguishing them from employees. These changes might also prompt salon owners to provide clearer contracts and documentation, reflecting the independent status of freelancers to avoid potential legal and financial repercussions associated with misclassification.
Moreover, salon owners should consider the benefits of these adjustments, such as fostering a more entrepreneurial environment where freelancers have more control over their work. This can enhance the salon’s service diversity and appeal to a broader client base, potentially leading to increased business opportunities.
Overall, navigating these legislative changes requires salon owners to be proactive, seeking legal advice where necessary, and engaging with freelancers to create transparent, mutually beneficial working arrangements. This will not only ensure compliance with the Fair Work Legislation Amendment but also position salons for continued success in a competitive market.
To fully adhere to the guidelines and provide a detailed response for a hypothetical section on “Case Studies and Best Practices” for salon owners navigating the implications of the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023, we would look into real-world examples and actionable strategies. This would involve outlining scenarios where salon owners successfully adapted to similar legislative changes, focusing on maintaining compliance while fostering positive relationships with freelance hairdressers. Best practices would include transparent communication, clear contractual agreements detailing independence criteria, and mutual respect for professional boundaries. Additionally, it would cover strategic planning for salon operations, emphasising the importance of legal consultation and continuous education on employment laws to ensure both salon owners and freelancers thrive under the new regulations. This approach ensures a fair, productive working environment that benefits all parties involved.
Case Study
Imagine a salon named “Glamour Waves,” owned by Sandra, who employs a mix of permanent staff and freelancers. The freelancers have written contracts stating that they are independent contractors, use the salon’s booking system, use and sell the salon’s haircare products, and rely on the salon’s payment system for client transactions. The introduction of the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 has prompted Sandra to reassess these arrangements.
Sandra realises that the freelancers’ use of salon resources closely aligns them with employee status under the multi-factorial test. To maintain their independent contractor status, Sandra decides to implement changes. Freelancers are encouraged to use their own booking and payment systems, giving them greater autonomy over their work. They also start bringing in their specialty tools and products, allowing them to operate more as independent entities within “Glamour Waves”. This shift gives a stronger argument that they are true contractors, but also empowers the freelancers, giving them a sense of ownership over their services and client relationships.
As we navigate the complexities introduced by the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023, it’s clear that staying informed and proactive is essential for salon owners. Adapting to these changes not only ensures compliance but also presents an opportunity to enhance the operational dynamics between salon owners and freelance hairdressers.
For those seeking additional guidance and resources, the Australian Hairdressing Council offers an invaluable support system through their Solo Operator Select program. This program is tailored to provide salon owners with the latest information, best practices, and a community of like-minded professionals. I encourage salon owners to reach out to the Australian Hairdressing Council and explore the benefits of joining the Solo Operator Select program, ensuring your salon remains a beacon of innovation, compliance, and success in the hairdressing industry.
You can find out more about the Australian Hairdressing Councils Solo Operator’s membership here: https://www.theahc.org.au/solo-owner-select
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