By Greg Allan, tradesman and creator of Data First Coaching
How does the Fair Work Ombudsman decide if an installer is an employee or a subcontractor?
The Fair Work Ombudsman's whole of relationship test looks at the real substance of the working relationship, not the label on the invoice or the contract, weighing things such as control over hours, work location and how the work gets done. For a security technician fitting CCTV, alarm or access control gear, that control test usually comes down to who actually decides when, where and how the install happens.
On a commercial or strata install job, an employed technician usually works the hours and site rules set by the security business, using its van, its tools and its process for testing and sign-off. A genuine subcontractor brings their own gear, sets their own hours around the job, and can turn work down. The Fair Work Ombudsman's Whole of relationship test is the starting point for any security business running a mix of the two across cabling, camera and network install work.
Does a security licence change who counts as a subcontractor?
Yes, and the rule differs by state, because security licensing sits with each state's own regulator on top of the general employment test. In New South Wales, the Security Industry Act 1997 sets conditions on when a master licensee can engage a subcontractor to provide persons for a security job, including requiring the client's written agreement before the work is subcontracted. In Victoria, the changes to private security licences and registrations from Victoria Police mean an independent contractor with an ABN doing security work needs to hold both an individual operator licence and a business licence, specifically to stop sham contracting in the industry.
A security technician running install and monitoring work across state lines, or a business taking on strata and commercial contracts outside its home state, needs to check both tests: the general employment test from the Fair Work Ombudsman and the ATO, and the licensing rule for wherever the install or service contract sits. These are two separate checks, not one.
Why isn't having an ABN or a written contract enough on its own?
Having an ABN, invoicing for the job and having a signed agreement calling someone a contractor do not settle the question on their own, because what decides it is the actual working arrangement. According to business.gov.au's employee or contractor tool, an ABN is not the deciding factor, and a written agreement saying someone is a contractor does not override the real relationship if the facts say otherwise.
The ATO's guide to employees and independent contractors asks whether the worker is serving in the security business as part of it, or running their own business providing a service to it, including whether the contract lets them send someone else to do the install in their place. Apprentices, trainees, labourers and trade assistants on an install crew are treated as employees regardless of any contractor paperwork, as the ATO's hiring a new worker page sets out. Getting this wrong is not a paperwork slip: the ATO says it is against the law to wrongly treat an employee as an independent contractor, and the Fair Work Ombudsman describes this as sham contracting unless the business can show it reasonably believed the worker was genuinely a contractor. This is general information, not legal, tax or employment advice. Check your own situation with the body named here or a qualified adviser.
What matters more to your margin: the label, or whether the cost is booked to the job?
Whichever way a worker is classified, the number that actually protects your margin is whether that labour cost, subcontracted or employed, gets attributed to the job it was spent on. A security systems business running employed technicians on monitoring and service contract work, which is supposed to be the steady, recurring revenue, alongside subcontracted installers on overflow CCTV or access control jobs, can get the classification completely right and still watch a healthy quote turn into a thin result, because the cost of sales never got booked against that job.
Picture a security technician quoting cabling runs for a new camera network on a commercial site, where leads, quotes, job profit and incoming emails were scattered across a few different places, and every quote meant working out cable sizing and voltage drop by hand after the site visit. Their own business management system changed that: it tracks each lead through to the quote, works out cable sizing and voltage drop as part of quoting, reports the profit on every job automatically, turns incoming emails into tasks, and fills in a quote from photos taken on the site visit. None of that replaced the employment test. What it did was make sure the labour on that job, whoever carried it out, showed up against that job's cost of sales instead of disappearing into overheads.
How can AI agents keep your contractor records and your job costing straight at the same time?
An AI agent is software that does a piece of office work the way you would do it yourself, using your prices, your wording and your rules, so it applies the same test to every job rather than a different one each time an owner is rushed. For a security business, that means applying your rule for when a subcontractor invoice goes against cost of sales, and your rule for checking a technician's control, consistently across every install, callout and maintenance visit.
Data first means the agent starts from your own job and pay data rather than a memory of how the last job was priced. AI agents can flag a subcontractor invoice that has landed in overhead instead of cost of sales, and can hold a reminder to recheck a long running subcontractor relationship against the control factors in the whole of relationship test, so the classification question and the costing question both get looked at from the same record, on the same schedule, instead of once at the end of the financial year.
Where can you check the current rules?
- Whole of relationship test - the Fair Work Ombudsman's test for whether a worker is an employee or a contractor, including the control factors.
- Employee or independent contractor - the ATO's guide to the tax and super side of the classification.
- Hiring a new worker - the ATO on why apprentices, trainees and labourers are always employees.
- Employee or contractor? - business.gov.au's tool and the common myths around ABNs and written agreements.
- Contractors in building and construction - the Fair Work Ombudsman on contractor labels in the building and construction sector.
- I think I could be an employee not a contractor - what sham contracting means and how it is assessed.
- Security Industry Act 1997 - New South Wales rules on master licensees engaging subcontractors for security work.
- Changes to private security licences and registrations - Victoria Police on licensing for independent contractors doing security work.
How does Data First Coaching approach this?
Data First Coaching starts from your own job and pay records, not from a guess about which installers are contractors and which are employees. Greg Allan's Trade Business Intelligence reads your actual job costing, install and service contract data alongside ten years of coaching trade businesses, and looks first at whether labour, subcontracted or employed, is landing against the job it was spent on. That is usually where the real problem starts, not in the classification itself. Greg puts it plainly: “if you don't systemize, you might find yourself getting into a position where you are constantly saying the same thing”. The how, the systems and the checks, are worked through inside the Academy, with members, because the Trade Business Intelligence is powered by every member who joins open minded, innovative and willing to share.
