By Greg Allan, tradesman and creator of Data First Coaching
Why does calling a crew member a subbie or an employee change what a fence quote actually says?
Most fencing businesses in Australia price a boundary fence, pool fence install or rural fencing run line by line: panels, steel posts, footings, materials, labour. Whether the person digging the post holes or running the auger is a subcontractor or an employee decides which bucket that labour sits in. An employee's wages usually belong in the direct cost of the job. A subcontractor's invoice can end up buried in overhead if the booking is set up wrong, which hides the job's real gross profit margin from the moment the quote is accepted.
This is not only an ATO classification exercise. A fencer who gets it wrong can have every quote look fine line by line and still not know which jobs on a long rural run actually paid.
How do the ATO and the Fair Work Ombudsman tell a subcontractor from an employee?
You tell the two apart by looking at the whole arrangement, not one clause. According to the ATO, an employee serves in your business and performs work as its representative, while an independent contractor provides a service to further their own business.
Control is one of the clearest signals. The ATO says your business has the legal right to control how, where and when an employee does the work, while a genuine contractor can choose how, where and when the work is done, subject only to reasonable direction. If a crew member decides which day they dig the post holes and how they run the auger, that leans contractor. If you set the hours and the method, that leans employee.
Delegation matters too. If there is no clause letting the worker send someone else to do the digging, and they must turn up and install it themselves, that is an employee trait.
The Fair Work Ombudsman applies the whole of relationship test, weighing the real substance and practical reality of the relationship, not what the paperwork calls it. The ATO's own ruling, TR 2023/4, says this is a question of fact about the totality of the relationship, with no checklist that spits out the answer. Every fencer's crew arrangement has to be weighed as a whole.
Are apprentices and post hole labourers ever subcontractors?
No. The ATO is direct: apprentices, trainees, labourers and trade assistants are always employees, never independent contractors, whatever the contract says. Someone learning the trade on your crew, holding panels and digging footings while you install, is an employee.
Who supplies the gear is another signal. If your business owns the auger, the trailer and the steel posts, or reimburses a worker for using their own, per the ATO's page on equipment and tools, that points toward employment rather than a true subcontract. A genuine subcontractor usually brings their own tools to the dividing fence or rural job.
Subcontractors can hire their own subbies too. The Fair Work Ombudsman's building and construction page notes contractors may hire other contractors, called subcontractors or subbies, with the same legal protections, including protection from adverse action.
One trap: even a genuine contractor may still need super paid if their contract is principally for labour, so classifying someone as a sub does not automatically remove that obligation.
What happens if a fencing business gets the classification wrong?
Calling an employee a subcontractor on purpose is illegal. The Fair Work Ombudsman describes sham contracting as telling a worker they are a contractor when they are actually an employee, without reasonably believing it. The South Australian Law Handbook sets out the related sections of the Fair Work Act 2009, which say an employer must not misrepresent an employment relationship, must not dismiss someone to re-engage them as a contractor, and must not make a false statement to push someone into contracting.
It matters to you because only an employee can be covered by an award or get the protections of the Fair Work Act, so misclassifying a fencer who should be an employee can leave them without cover they are entitled to.
These are Commonwealth rules that apply to fencing businesses across Australia. Greg coaches fencing business owners online across Australia and New Zealand, starting from the owner's own data, so where the business is based does not change how the coaching works. If a dispute ever comes up, check with the Fair Work Ombudsman directly for the current position. This is general information, not legal, tax or employment advice. Check your own situation with the body named here or a qualified adviser.
How does this change the way you check the margin on a boundary fence, pool fence or rural job?
This is where classification stops being paperwork and starts being job costing. Once you know who on your crew is an employee and who is a genuine subcontractor, you can book their cost against the right job, which is what lets you see the true gross profit margin on that boundary fence or pool fence install, not an average across the month.
Picture a fencer running crews across boundary jobs, pool fence installs and the odd rural fencing run, who pulls a cost of operations figure to check whether jobs are really making money. Overhead from non-billable hours has been loaded onto every job's rate, so every job on the board looks like it is barely covering its cost. Stripping the non-billable hours back out drops the figure so low it is obviously wrong too, because now none of the real overhead is accounted for anywhere. The true number sits somewhere in between, and finding it by memory is how a fencer ends up pricing the next pool fence job on a figure that was never right.
This is where data first thinking earns its keep: the answer sits in the job and payroll data the business already has, not in anyone's head. AI agents, software that does a job the way the owner would, with their own prices, wording and rules, can pull the actual wages, subbie invoices and overhead from the business's live numbers and work out the true cost of running a job, billable hours included. AI agents keep that costing current as the crew and the jobs change, instead of letting it go stale between checks.
Where can you check the current rules?
- ATO: difference between employees and independent contractors covers the core tests, including control and delegation.
- Fair Work Ombudsman: independent contractors explains the whole of relationship test and sham contracting.
- ATO: hiring a new worker sets out which roles are always employees and when super applies to contractors.
- TR 2023/4 is the ATO's ruling on how the whole relationship is weighed as a question of fact.
- Fair Work Ombudsman: contractors in building and construction covers subcontractors and their protections in the trades.
- South Australian Law Handbook: employees and independent contractors sets out the Fair Work Act sections on sham contracting.
- ATO: equipment, tools and other assets covers who is expected to supply gear like an auger or trailer.
How does Data First Coaching approach this?
Data First Coaching starts from the fencing business's own job and payroll data through the Trade Business Intelligence, not from a description of how the crew is set up. It looks at where labour cost is actually landing against each boundary fence, pool fence or rural job, and traces back whether a subcontractor or employee call upstream is the real reason a job's margin does not match the quote. Greg built this from his own trade background: “I was subcontracting for a mate of mine” before running his own business, so he has sat on both sides of that line. The how is worked through inside the Academy, with members who are open minded, innovative and willing to share, because the Trade Business Intelligence is powered by every member.
