By Greg Allan, tradesman and creator of Data First Coaching
How does a window and door business tell a subcontractor from an employee in Australia?
A window and door installer cannot tell a subcontractor from an employee just by checking whether the fitter has an Australian Business Number or sends through an invoice at the end of the job. Most window and door installers assume that paperwork settles it, but it does not. The Fair Work Ombudsman says independent contractors, also called contractors or subcontractors, work for themselves providing a service to another business, and says plainly that “contractors don’t have the same rights and obligations as employees.” Which one a fitter actually is depends on the real working arrangement, not the label on the contract.
The Fair Work Ombudsman's independent contractors page and the ATO's employee or contractor guidance both start from the same point: the business doing the hiring is responsible for getting the classification right, and the written agreement, if there even is one, is only part of the picture.
For a window and door business bringing in subbies to finish a run of aluminium frame sliding door and bifold installs before a builder handover, this is not an abstract legal question. Every install that goes out under the wrong label is a job that is costed wrong somewhere in the books.
Why does getting this wrong quietly wreck the margin on a sliding door or bifold install?
Misclassifying a fitter does not show up as an error on the day it happens. It shows up later, as a gross profit margin on an install that looks fine on paper but is not real, because the labour behind it was never booked the way it actually ran.
When a supplier's lead time pushes a double glazing order back and a sub is brought in to catch up a batch of installs, a sub invoice for that bifold job can get lumped into general overhead instead of sitting against the specific job it belongs to. The install then looks more profitable than it was. When a fitter who is really an employee is paid like a sub, with no leave or super tracked against their time, the true cost of running that crew member on the next timber frame renovation job is hidden too. Either way, the window and door installer ends up quoting the next sliding door replacement off a margin that was never real to begin with.
What does the ATO and Fair Work actually look at for a window and door fitter?
You need to look at the whole relationship between your business and the fitter, not any single factor on its own. The Fair Work Ombudsman's contractors in building and construction page sets out what it looks at for the residential building sector specifically: whether the worker has a contractor agreement and an ABN, who decides how the work is done, who carries the risk if a measure is wrong or an install needs redoing, who supplies the tools, who sets the schedule, and whether the fitter is free to send someone else to do the job in their place.
For constitutionally covered businesses, Fair Work now applies what it calls the whole of relationship test to work going forward, in place of the narrower test used for earlier work. Being called a subcontractor in a written agreement does not settle it on its own. The Fair Work Ombudsman is explicit that if the real relationship meets the test for employment, the worker is legally an employee, no matter what the contract calls them.
Does it matter if your fitter has an ABN, their own van, and invoices you for the install?
Having an ABN and sending an invoice helps, but it does not decide the question on its own. If the fitter is actually operating through a company, trust or partnership, the ATO treats that entity as the contractor for tax and super purposes, whatever the window and door installer doing the glazing work is called day to day. If you've hired an individual directly, the ATO says the detail inside the working agreement, written, oral, or a mix of both, is what decides the classification.
Telling a fitter they are a contractor when your business does not genuinely believe that is the case is its own problem. The Fair Work Ombudsman's page on sham contracting says it is illegal to represent a worker as a contractor without a reasonable belief that they are one. Apprentices and trainees working toward their trade, along with labourers and trade assistants brought on to help with a window and door install, are treated as employees every time. The ATO's hiring a new worker guidance and the Fair Work building and construction page both say apprentices and trainees can't be contractors.
What about super, payroll tax, and keeping the costing honest on every install?
Super and payroll tax follow their own rules, separate from the main employee or contractor test. According to the ATO, you may still have to pay super for a subcontractor if their contract with you is mainly for their labour, even where everyone agrees they are a genuine contractor for other purposes. Payroll tax works differently again: the RevenueSA contractor decision tools used in South Australia and the Revenue NSW practice note on payroll tax contractors used in New South Wales both run tests specific to their own state, and both say a written contract calling someone a contractor does not settle whether payroll tax applies to the labour being paid for. Other states and territories run their own payroll tax rules through their own revenue office, so a window and door installer working across more than one state needs to check each one separately.
None of this is work your crew can see from a van on a Tuesday, but it decides whether the gross profit margin you quoted a sliding door replacement on was ever real. This is where a data first approach earns its keep: instead of relying on memory of who was paid as what at the end of the quarter, the classification and the job cost sit against the actual job and the actual pay record from the day the work happened. An AI agent, which is software that does a job the way you would do it yourself using your own prices, wording and rules, can hold that record against each fitter and each install as it happens, flagging a mismatch before it buries itself in the next activity statement. A second AI agent can keep the paperwork trail, the agreement terms, the ABN check, the super obligation, lined up against the job it belongs to, so the owner is not reconstructing it from memory when a question about a fitter lands.
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?
- ATO employee or contractor guidance: the core test for tax and super purposes, including how companies, trusts, partnerships and individuals are treated differently.
- Fair Work Ombudsman independent contractors page: what a contractor is and how contractor rights differ from employee rights.
- Fair Work Ombudsman contractors in building and construction page: the factors looked at specifically in the residential building sector, and the apprentice and trainee rule.
- ATO hiring a new worker guidance: which workers are always employees, and the super obligation for labour-heavy contracts.
- Fair Work Ombudsman whole of relationship test: the current test used for constitutionally covered businesses.
- Fair Work Ombudsman sham contracting page: what happens if a worker is wrongly told they are a contractor.
- RevenueSA contractor decision tools: the South Australian payroll tax test for contractors.
- Revenue NSW practice note on payroll tax contractors: the New South Wales payroll tax test for contractors.
How does Data First Coaching approach this?
Data First Coaching starts from your own job and pay records, not from a memory of who was on the tools last renovation season. Greg Allan built his own trade business before coaching others, and the Trade Business Intelligence looks at how your subcontractors and any employees are actually costed against real install jobs, because that is usually where the margin problem starts, not in the quote itself. Greg has described “the relief with the full-time trades person was instant” once the real costings were understood, and that same clarity is what tells a window and door business whether a sub or an employee is the right fit for its install volume. 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.
