By Greg Allan, tradesman and creator of Data First Coaching
Is the welder on the ute a subcontractor or an employee?
Many fabrication shops assume a worker is a subcontractor simply because the person holds an ABN, sends an invoice, or already owns their own grinder and welding gear. The Fair Work Ombudsman is clear that there usually won't be one deciding factor, and a worker who has an ABN or issues invoices isn't automatically a contractor. A welder doing the same structural steel work as the bloke next to him on the payroll can still be found to be an employee.
A shop often runs this mix without thinking about it: one welder on wages cutting, folding and welding brackets in the workshop, and another invoicing under his own ABN for the site install of a balustrade or a gate. The paperwork looks tidy. The relationship underneath it is what the law actually checks, and that is where fabricators get caught out.
Why does this matter to the margin on a fabrication job?
When a fabricator books a worker's labour the wrong way, the cost often lands in the wrong place on the job costing, so a structural steel or balustrade quote can look like it has made good money while the real margin, once powder coat, galvanising and site install are added, has already gone. Gross profit margin is a number that needs checking at the moment a job is quoted, not worked out afterwards from the bank balance.
Fabricators lean on subcontracted certified welders for specific structural work, on subbie installers for site jobs, and on employed shop staff for the day to day fabrication, cutting and folding. If the subbie's invoice and the employee's wage are not costed against the job the same way, every quote built on that costing is wrong before the first offcut hits the floor.
What test does a fabrication business need to apply to each worker?
You need to look at the whole relationship, not one factor in isolation. The ATO says an employee works in your business, while an independent contractor is running their own, and that you work this out by reviewing the legal rights and obligations in the actual contract, not just what the paperwork calls the person.
Some things are settled regardless of what the contract says. The Fair Work Ombudsman says apprentices and trainees can't be contractors, they must be employees, and the ATO says labourers and trade assistants are always employees, never independent contractors. Calling someone a contractor in the paperwork does not change what they are if the relationship itself is an employment one.
The Fair Work Ombudsman also runs a specific whole of relationship test for certain businesses, looking at control, who carries the risk, who supplies the tools, and whether the worker can subcontract the job to someone else. Not every business has to apply it the same way, so check your own situation against the test rather than assuming it does or does not apply.
What about workers compensation and super for subcontracted welders?
Workers compensation and tax use different tests, so a certified welder can be a contractor for tax purposes and still be a deemed worker for workers compensation premiums. In New South Wales, SIRA says simply calling someone a contractor, or them having an ABN, does not decide their status for workers compensation. In Queensland, WorkSafe looks at things like whether the worker can subcontract the job themselves and whether they are paid against a quote rather than told how and where to do the work.
This differs state by state, so a fabricator running site installs across more than one state or territory needs to check the rule where the work is actually happening, not assume one state's answer covers another. The ATO also notes that super can still be owed on a subcontractor if the contract is mainly for their labour.
This is general information, not legal, tax or employment advice. Check your own situation with the body named here or a qualified adviser.
How can AI agents keep job costing and worker classification straight?
An AI agent is software that does a job the way you would do it yourself, with your prices, wording and rules. For a fabrication business, that means an agent can check that every employee's hours and every subcontractor's invoice are booked against the job the same way, before the job gets quoted again or invoiced out, instead of someone discovering the mismatch weeks later.
This works because it starts data first, from your own job and pay data rather than memory. AI agents can sit right where the labour gets entered against a structural steel frame, a balustrade or a site install, holding the job until the cost is booked correctly. Greg teaches that the decision to bring someone into the business, employed or subcontracted, should come from understanding the true cost and output of a working hour, not a gut feel look at the bank balance. A fabricator who knows that number can decide with confidence instead of guessing.
Where can you check the current rules?
- Whole of relationship test - Fair Work Ombudsman: how the test weighs control, risk and the ability to subcontract.
- Independent contractors - Fair Work Ombudsman: who the whole of relationship test applies to.
- Contractors in building and construction - Fair Work Ombudsman: rules specific to apprentices, trainees and common myths.
- I think I could be an employee not a contractor - Fair Work Ombudsman: the factors a worker or business should weigh up.
- Hiring a new worker - ATO: the ATO's view on employees, contractors and super.
- Employee or independent contractor - ATO: how to review the actual contract to decide.
- Worker or contractor status tool - SIRA NSW: how workers compensation status is decided in New South Wales.
- Who your policy needs to cover - WorkSafe Queensland: how workers compensation status is decided in Queensland.
How does Data First Coaching approach this?
Data First Coaching starts from the owner's own job costing, through the Trade Business Intelligence, to see how every welder and subbie on the books is actually booked against each job. That is where misclassification usually shows up first, not in a policy document but in a margin that does not match what was quoted. Greg talks about “understanding the efficiency of working”, whether that hour is employed or subcontracted, as the real measure of what a worker is worth to the business. The how, the systems that keep this correct job by job, is worked through inside the Academy, with members, because the Trade Business Intelligence is powered by every member who joins it.
