More employers than ever before are opting to engage overseas workers, especially now that Australian workers are increasingly working from home. Reasons to do so include:
- accessing talent;
- existing workers moving overseas; and
- reducing the cost of labour.
Suppose you are an employer considering this approach. In that case, it is important to consider how you will hire overseas workers. Here, you must ensure you are complying with both Australian laws and any laws overseas which may apply. This article explains when the Fair Work Act 2009 (Cth) (FWA) will cover an overseas worker and how to comply with it when deciding how you engage workers. This article also considers local industrial law which may apply to the relationship.
Does the FWA Cover the Worker?
How you hire a worker, including whether you engage them as contractors or employees, will depend on whether the FWA covers them. If the FWA covers them, you must comply with its terms. If the FWA does not cover them, you must not comply with the FWA.
To determine whether the FWA covers a worker, you should consider whether the:
- employer is an "Australian employer" as defined in the FWA; and
- worker is an "Australian-based employee" as defined in the FWA.
What Is an "Australian Employer"?
An "Australian employer" broadly includes all Australian businesses and generally excludes:
- the public sector; and
- local government employees, although this varies in each state or territory.
However, in Western Australia, only Pty Ltd companies (or other corporations incorporated under the Corporations Act 2001 (Cth)) amount to an "Australian employer".
What Is an "Australian Employee"?
An "Australian employee" is one
- whose primary place of work is in Australia; or
- who is employed by an "Australian employer" as defined above.
However and of crucial importance, the definition of "Australian employee" excludes "an employee who is engaged outside Australia [...] to perform duties outside Australia." Whether this exclusion covers a worker is a question of fact, and some of the matters considered by a court may include the following issues:
|Did the entering of the contract occur outside or inside Australia?||
What was the location of the worker at the time of signing the contract?
For example, if the worker is located in the US at the time of signing the agreement, they are more likely to be excluded from the definition of an "Australian employee."
|Did the worker perform duties from outside or inside Australia?||
For example, if the employee was at all times located in the US, they are more likely to be excluded from the definition of an "Australian employee".
it is possible for the worker to visit Australia but not be an "Australian employee."
|Was the worker engaged to perform duties outside or inside Australia?||
This question may be determined by reference to whether the employee:
For example, an employee whose duties are to market to the Asia-Pacific region may be more likely to be excluded from the definition of an "Australian employee" as opposed to an employee whose duties are to market to Australia.
It is possible for a worker to perform some duties in Australia but nonetheless not amount to an "Australian employee."
If the FWA Covers the Overseas Employee
If the FWA applies, you should engage the worker as an employee under an employment agreement. You may choose to provide them with the same employment agreement as your Australian based employees with some minor tweaks to acknowledge their place of work.
If you engage a worker as a contractor, you are at risk of breaching the sham contracting provisions of the FWA. These prohibit employers from engaging workers as contractors when they're better classified as employees.
Given the FWA covers your employees, you should ensure you comply with the FWA, including the terms of any relevant modern awards.
For example, you should consider employees' entitlement to:
- leave, including annual, sick and parental leave;
- minimum wages;
- protections from discrimination;
- not being unfairly dismissed; and
- any redundancy payments.
If the FWA Does Not Cover the Overseas Employee
If the FWA does not apply, you may prefer to engage the worker as a contractor under a contractor agreement. This is because if the FWA does not cover the employee, you do not need to consider the sham contracting provisions.
Further, a contractor arrangement is a commercial arrangement, and you can choose the commercial terms as you see fit without reference to entitlements under the FWA. This does not mean that you cannot offer the employee benefits similar to those under the FWA. Instead, you can define these benefits as you see fit.
For example, your contractor agreement may provide for periods of unauthorised absences which are similar to employees' leave entitlements under the FWA. However, you could offer three weeks per year (instead of four under the FWA).
It is possible for you to elect to provide the worker with an employment agreement rather than engage them under a contractor agreement. However, you should speak to a lawyer about this option and get their assistance in preparing an employment agreement suitable for that particular jurisdiction.
Overseas Industrial Law
It is also important to remember that workers may be covered by local industrial law.
For example, it is possible for an employee covered by the FWA to also be covered by Philipino industrial law if they are located in the Philippines.
Alternatively, the FWA may not cover a French worker, so you engage them as a contractor. Here, they may have entitlements under French industrial law for which you may be liable if they are located in France.
On that basis, you should seek advice with a local lawyer about whether you covered by the local industrial law. If so, you need to ensure you know how to comply.
Determining whether the FWA covers a worker is crucial when determining how to hire overseas workers. If the FWA covers an employee, consider engaging them as employees under an employment agreement. It may be more practical to engage them as contractors under a contractor agreement if they are not. You may also choose to contact a local lawyer to determine any local laws that apply to the relationship.