Charter of Contractual Fairness
On 1 July we launched our Charter of Contractual Fairness

We have heavily drawn the principles of contract fairness from the new consumer unfair contract protections laws. If it's fair for consumers, it's fair for small business people - the self-employed and independent contractors.

We are currently writing to Australian corporations asking them to commit to contract fairness in their dealings with small business people.
Election Face-off 2010
Here's how the 2 sides currently shape up for small business/self employed people! (10 July 2010)
Gillard's ALP

So far, they've told us "here's what we've done!"

• Started a superannuation clearing house
• Begun a small business online inquiry service
• Established a Small Business Advisory Committee
• New liability contract guidelines for government procurement
• National Business Name Registration
• A new guide for self-employed people
Abbott's Coalition
They've announced the first part of "here's what we're going to do!"

• A dedicated Small Business Minister who will be in Cabinet
• A new Small Business Ombudsman to handle and resolve small business complaints about the federal government
• The extension of consumer unfair contract protections to small business people
• Retention of the current self-employed (PSI) tax laws
• Stop small business red tape on Paid Parental Leave
• Mr Abbott's and Mr Billson's joint press release
What we've been asking for
• The extension of consumer unfair contract protections to small business people

• Retention of the current self-employed (PSI) tax laws. Our letter to the PM (28 May 2010)

Failure to fix unfair business contracts
ICA says "extend unfair contract protections for consumers to small business".

New laws:
Legislation #1 (March 2010)
Legislation #2 (June 2010)

Here's our summary of the situation.
How the legislation defines unfair contract terms.
Why small business people should have TPA protections from unfair contracts.
We need an answer on tax, please
We've made it quite clear that self-employed (PSI) tax should not be changed.

We've written to the PM for an answer, but we do not yet have a reply.

Tony Abbott has been clear. NO change!
Industry/Retail super funds must come out
The Cooper Review into superannuation says the big funds are not disclosing enough and must be forced to do so. This is vital. See Chapter 4.

Here's why workers' money is at risk if disclosure is not enforced.
Look after your retirement
The Cooper Review of superannuation says Self Managed Super Funds are good and need little change to existing arrangements. This is welcome. See Chapter 8.

The Report also seems to have stopped the attack against SMSF's.
Stand Up for Your (Contract) Rights!
We're monitoring contracts in general and promoting good contracts in particular. For example:
Another bad contract (Jun 2010)
One of the worst contracts we've seen (Jan 2010)
'Tom' versus DEEWR (Nov 2009)
But a positive development from government
Ken Phillips comments
And some interesting discussions
Central Banks on Debt
Since mid-May, central banks have been worried about sovereign debt. Click here for a list of useful links and summaries.
Problems with Phoenix companies
Two ICA members' tell their stories
ATO information on reporting suspect activity.

Govt's attempts to do something:
ICA comment

Newspaper comment:
The Australian
The Age/Sydney Morning Herald
Business Spectator

What 'Tom' thinks
What 'Jim' thinks
Dick Davies Writes...
"...the human fabric of the workplace precedes in importance that of technology!"
Dick Davies prods us to think about management, independence and motivation. Click here.
Stop Sham Contracts!
ICA supports the prevention of sham contracts. We monitor what's happening with them:
One person's story
Successful FWO prosecution (Dec 2009)
Info from Fair Work Ombudsman (July 2009)
First sham contract prosecution: ICA summary
Make a complaint to FWO
Business Spectator article
Read the debate
... Unquote
The Pessimists' Economic Views
(Posted January 2010)
We've brought together some pessimistic views about economics and likely economic trends in 2010:
US toxic loans
'US as sick as Greece'
Ken Phillips's summary
An 'IMF' perspective
Predicting 2010
Government debt a giant ponzi scheme?


Click to enlarge.

Ken Phillips on the debt equation


Watching Goldman Sachs
Rolling Stone magazine has blown the lid on Goldman Sachs:
Article 1 [July 2009]
Article 2 [April 2010]
Article 3 [May 2010]
Tax burden: UK versus Australia
Just as the UK is moving toward more sensible small business (contractor) tax laws, in Australia we're having to defend the progress we've made.
Laughing lawyers
You'll be amazed by the 'slips' that some lawyers make in court.
Update May 2010

Independent Contractors of Australia is frequently asked for statistics on the numbers of self-employed persons. The following statistics have been collated in response to those requests. ICA tracks these figures and updates them as new statistics become available.

Summary
  • 18.5 per cent of the Australian workforce are self-employed, which equates to 1.97 million persons. [2009]
When this is analysed further:
  • 28 per cent of the private-sector workforce are self-employed. [NB: This is based on 2004 figures.1]
Self-employed persons

[Click to enlarge]

Total Workforce
November 200910.7 million
November 200810.6 million
November 200610.1 million
November 20049.6 million

Decrease in the number of self-employed 2008-2009: 56,000 (2.8 per cent decline)

ICA comment on November 2009 figures

Self-employed numbers down slightly (Comment made in May 2010)
The latest ABS data on self-employed numbers indicate a decline of 56,000 (2.8%) between November 2008 and November 2009. What's more, there's been a shift from people 'employing' others to working only for themselves. The percentage of self-employed in the workforce is also down slightly from 19.1 per cent to 18.45 per cent---a return to levels around 2006.

In the same period (November 08 to November 09) the total unemployment rate increased from 4.1 per cent to 5.7 per cent, with 171,000 people being put out of work. Here's our analysis of the data.

The ABS splits self-employed people into two categories; people who 'supervise' other people (other business operators) and people who don't supervise anyone else (independent contractors). The 'business operators' are the traditional self-employed who employ someone---say a plumber with an apprentice or a shopkeeper with a couple of staff.

What seems to have happened during that 12-month period is that 89,000 self-employed people have stopped employing someone. This probably reflects the general downturn in employment up until November 2009. Overall, around 56,000 self-employed people have either left the labour force or found themselves work as employees.

Anecdotally, we can see some events that have pushed this. When the global financial crisis hit, it was apparent that many large companies put an immediate freeze on contractor/consultant use. However, feedback we've had since late 2009 indicates that this freeze has been lifted and so many people may have returned to work. The other trend has been at the federal government end, where they have put almost a blanket ban on the use of information technology contractors and have forced many to become public service employees.

On the raw data it could be assumed that self-employed people have been hit harder by the downturn in economic activity, representing 32 per cent of the drop off in work when they form 19 per cent of the workforce. However, what is unknown is how many self-employed people have transferred to employment and are still working.

This trend could also have reversed since November 2009 given that unemployment has dropped again to 5.3 per cent (April 2010).

ICA comment on November 2008 figures

 The latest Australian Bureau of Statistics (ABS) figures are based on labour force statistics gathered in November 2008 and released in June 2009. They are available in PDF form here.

The figures are significant for two reasons:
  • The number of self-employed people as a percentage of the workforce is proving stable over the medium term at around 19 per cent of the workforce. The actual number of self-employed people has increased marginally over the last few years as workforce numbers have increased.
  • The 2008 ABS data uses revised methodology and sets of questions which ICA believes are improvements on the past. The new approach provides a more accurate picture of the self-employed community.
Why the revised methodology is an improvement
  • In the past, the ABS labour force surveys seemed to use an approach that closed its eyes to the legal status of the self-employed. That is, the approach seemed to ignore the fact that self-employed people work under commercial arrangements and not employment contracts. This 2008 survey accepts that clear distinction and uses it as the basis for the survey methodology. This means that the ABS definitions are now consistent with the International Labour Organisation definitions, the Independent Contractors Act and definitions used under common law for workplace relations and related legislation.
  • In the past, this simple distinction (commercial vs employment) was not used, it seems, because of a belief that questions could not be formulated that would make this distinction. However, this 2008 survey asks people to self-identify. ICA believes this is a logical approach which has proven successful in this survey. Most people who are self-employed (in a commercial arrangement) are very aware of the fact that they are in business and display this in their behaviour and attitudes.
Two ABS categories of self-employed
The 2008 survey splits the self-employed community into two broad categories:
  1. People who provide their time and labour and who only manage themselves. The ABS tags these people as "independent contractors".
  2. People whose primary activity is managing others (have employees) and/or selling goods and services to earn income rather than relying on the provision of their labour. The ABS tags these people as "other business operators".
ICA has always seen the terms 'independent contractor', 'self-employed', 'micro/small business', 'consultant', 'freelancer', etc., as highly interchangeable. The key identifier is the existence of commercial arrangements. It is the commercial fact that focuses ICA's activities when arguing and discussing public policy issues. Nonetheless, the ABS distinction between those who 'manage and/or sell good/services' and those who principally provide their 'labour/time' is a useful distinction which should aid future policy analysis.

The 'other business operators' are probably that group which most people think of when considering the self-employed---that is, a person running a shop, or selling something. This group probably doesn't create a lot of confusion for policy analysts because they fit into a category of business that can be 'seen' and are tangible. They are the typical small business.

The second category, 'independent contractors', is probably the group that cause most policy confusion because, for many observers, these people can appear to be 'employee-like'. It can be difficult to see this group as 'being in business' because there is often nothing tangible, such as a shop, for example, to point to. However, ICA believes that these people are definitely in business and that their behavior and attitudes reflect this. What needs to be understood is that an individual can be a business. It is not necessary to have premises or sell goods to 'be a business'. The ABS seems to have recognized this and accommodated it in its methodology.

Dependent contractor term removed
The 2008 ABS survey removes any identification of 'dependent contractor'. This was an identifier used in previous ABS surveys. It has frequently been used by labour academics to suggest that there were independent contractors who were really employees. ICA has always argued that this was and is a legally and commercially illogical and false concept. It would be like arguing that there are 'independent employees'. Both are concepts that confuse rather than assist policy analysis. The ABS seems to have dropped the use of the term 'dependent contractor', which is consistent with the dropping of the term by the ILO. ICA believes that removal of this term helps obtain greater clarity in data collection and its subsequent use for policy analysis.

Self-employed: Profiling
The 2008 survey provides interesting data for analytic purposes.

Of the 2.03 million self-employed people:
  • 70 per cent are men.
  • 50 per cent are aged between 35 and 54 years and 28 per cent are over the age of 55
  • 54 per cent work more than 40 hours in a week
  • 86 per cent have a say over their start/finish times
  • 48 per cent work weekends
Of the almost one million 'independent contractors':
  • 73 per cent have more than one contract at any one time.
  • 79 per cent do not have employees v65 per cent are able to subcontract their work
Self-employed people are found in all areas of the economy, but heavier concentrations occur in construction, professional and scientific/technical areas, agriculture and the retail sector.

Comment
It is probable that, as the population ages (see graph below), more people are likely to be self-employed. It's a lifestyle thing. When we are younger, we're prepared to allow other people to dictate to us how we work. But as we mature, we become more experienced and sure of our business decisions. We want to control our own work and self-employment allows us to do this.

This will continue to present challenges for government and managers of employment-dependent firms. Governments will have to continue to review and improve their regulations to accommodate self-employed people. Firms will increasingly find that specialized and experienced talented people don't want to be employed. Firms will have to discover how to engage and work with people on commercial contracts.



References
    (1) Institute of Public Affairs: Just How Many Are There?
    (2) Productivity Commission of Australia, Pub 2001, ISBN 1 74037 053 8
    (3) Australian Bureau of Statistics, Pub 2000, Forms of Employment 6359.0
    (4) Australian Bureau of Statistics, Pub 2005, Forms of Employment 6359.0
    (5) Australian Bureau of Statistics, Pub 2007, Forms of Employment 6359.0
    (6) Australian Bureau of Statistics, Pub 2009, Forms of Employment 6359.0
    (7) Australian Bureau of Statistics, Pub 2010, Forms of Employment 6359.0
Note
Due to the change in methodology by the ABS (discussed above), specific comparisons between 2008 data and pre-2008 data should be treated with caution. However, observation of general trends is possible.

In 2007 ICA was invited to make comment on the ABS methodology review. Many of ICA's comments appear to have been incorporated in the 2008 methodology.