By Greg Allan, tradesman and creator of Data First Coaching
What decides if a locksmith’s worker is a subcontractor or an employee?
The regulators look past what the paperwork calls the worker and ask who actually controls the job, whether the worker can send someone else to finish it, and whether they are paid for a result or for their time. One clause in a contract, even one that says “this is a contracting arrangement”, does not settle it on its own.
For a locksmith, this plays out on the daily callout roster. An employee generally has their hours set by the business, works under the owner’s direction on which jobs come first, and cannot send a mate in their place to finish a rekey or a strata access control install. According to the ATO, Employee or independent contractor sets out that the right to direct what work is done, where, how and when is a sign of employment, and that an inability to delegate the work points the same way.
A genuine subcontractor locksmith is usually running their own show: their own van, their own key cutting gear, their own insurance, and the ability to put another qualified locksmith on an emergency lockout if they are double booked. The Difference between employees and independent contractors page notes that if the worker operates through a company, trust or partnership rather than as a person, that entity is always a contractor for tax and super purposes, whatever the person turning up to do the lock change calls themselves.
The Fair Work Ombudsman applies what it calls a whole of relationship test, weighing the real substance and practical reality of the arrangement rather than any single factor. Which version of the test applies can depend on the business structure: the Fair Work Ombudsman’s page on independent contractors explains that an incorporated business such as a Pty Ltd uses one test, while sole traders, partnerships and other unincorporated locksmith businesses in several states use a different one, so the right test depends on how the business itself is structured and registered.
Why do misclassified locksmiths carry more risk than they realise?
A locksmith business that assumes an ABN or a signed contract settles the question is often standing on ground that will not hold. The decision does not belong to the worker’s paperwork, it belongs to the real relationship, and getting it wrong exposes the business to obligations it thought it had avoided.
According to the employee or contractor decision tool, having an ABN does not automatically make a worker a contractor, and a written agreement that calls someone a contractor does not override the real relationship if the facts say otherwise. One group matters to most locksmith businesses specifically: the ATO’s page on hiring a new worker states that apprentices, trainees, labourers and trade assistants are always employees, never independent contractors, which matters for any locksmith bringing on a junior to learn master key systems or safe work under supervision. The same page warns that wrongly treating an employee as an independent contractor is against the law.
The Fair Work Ombudsman’s guidance on sham contracting is blunt about what happens when a business tells a worker they are a contractor when they are, in substance, an employee. That is treated seriously unless the business can show it reasonably believed otherwise, which is exactly why a locksmith relying on memory of “how we’ve always done it” with a long-time subbie can be exposed without knowing it.
How does this cost a locksmith business before the bank balance shows it?
This is where the legal question and the money question meet. You can have the label exactly right, the contract correctly worded, the ABN checked, and still not know whether the person doing the work is making you money, because that depends on where their cost sits in your books, not on their employment status.
Every quote for a lockout, a rekey, a digital lock install or a strata contract is built on an assumption about labour cost. If the wages for the employee who answered the after hours emergency, or the invoice from the subcontractor who fitted the security door, gets buried in general overhead instead of sitting against that specific job, the quote looks healthier than the job actually was. Checking gross profit margin at the moment you quote, not once a quarter when the BAS is due, is what keeps that assumption honest. A business run this way, data first, sees the true cost of each callout as it happens rather than discovering it when the bank balance tells a different story.
What changes when an AI agent tracks the true cost of your crew?
An AI agent is software that does a job the way you would, using your prices, your wording and your rules, which for this question means pulling the real wages and subcontractor cost against the real job instead of letting it sit in a lump of overhead. That matters because a growing callout roster can look like growth while quietly hiding which jobs are actually paying for themselves.
Picture a locksmith juggling emergency lockouts, rekeys for property managers, and a strata access control contract, all running through the same roster of employees and subcontractors. The owner could not get a straight answer on the true cost of running the business: non-billable hours, van time between jobs, and general overhead were all being loaded onto individual jobs, so every job looked unprofitable on paper. Strip those overhead costs out altogether and the figure for what an hour on the tools actually cost dropped so low it was obviously wrong in the other direction.
What changed was having an AI agent pull the actual wages and overhead figures straight from the business’s own live data and work out the true cost of running the business, with billable hours properly factored in. Overhead and non-billable cost now sit in their own bucket instead of being spread across every rekey and install, and the agent keeps that costing current as the roster of employees and subcontractors changes. The legal test still decides who is a contractor and who is an employee, but this is what decides whether either of them is actually making the business money.
This is general information, not legal, tax or employment advice. Check your own situation with the body named here or a qualified adviser.
Where can you check the current rules?
- Employee or independent contractor, the ATO’s control and delegation factors used to tell the two apart.
- Difference between employees and independent contractors, how the contract and business structure decide tax and super treatment.
- Employee or contractor decision tool, clears up common myths, including the ABN myth.
- Hiring a new worker, confirms apprentices, trainees, labourers and trade assistants are always employees.
- The difference between a contractor and an employee, a side by side look at how hours, leave and payment differ.
- I think I could be an employee, not a contractor, explains sham contracting and what a worker or business can do about it.
- Whole of relationship test, the Fair Work Ombudsman’s approach to weighing the full picture.
- Independent contractors, explains which test applies depending on how the business is structured.
How does Data First Coaching approach this?
Data First Coaching, built by Greg Allan, starts from the locksmith’s own job and finance data rather than from how the owner describes the business. For this question, the Trade Business Intelligence looks at where wages and subcontractor invoices actually land against jobs, because that is usually where the real problem starts, long before anyone argues about a worker’s legal label. Working out which rule applies to a particular worker is one part of the picture; working out whether that worker’s cost is telling the truth about the job is the other. The how of building that into the business is worked through inside the Academy, with members, because the Trade Business Intelligence is powered by every member who is open minded, innovative and willing to share what they learn.
