ICA - Independent Contractors: How Many? Update May 2007

Dick Davies Writes...
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Dick Davies prods us to think about management, independence and motivation. Click here.

Sham Contract Issues
	ICA supports the prevention of sham contracts. We monitor what's happening with them:
Successful FWO prosecution (Dec 2009) Info from Fair Work Ombudsman (July 2009) First sham contract prosecution: ICA summary Business Spectator article Read the debate

Work Safety Issues
There is a series of major developments occurring in the realm of work safety.
National Harmonization
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See here for ICA's submission to the draft National OHS laws.

Good/Bad Contracts

We're monitoring contracts in general and promoting good contracts in particular. For example:
One of the worst contracts we've seen
But a positive development from government
Ken Phillips comments
And some interesting discussions

What's Happening with Super?
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Easier Super Admin
Peter Strong submission Govt super clearing house (through Medicare)
Is Super Safe?
Business Spectator explains attacks on SMSFs Big super in trouble (USA) Mark I Big super in trouble (USA) Mark II USA super funds corruption
Australian Super Review
Profile of Australian super funds Government review: overview Government review: 24-page report

History Repeats
	Here's an interesting quotation from the history books! Images of the USA today?
'The budget should be balanced, the Treasury should be filled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome be bankrupt. People must again learn to work, instead of living on public assistance'
Cicero---55 BC

ICA Small Business Videos

During 2009, ICA made a series of videos on small business issues. The collection appears below.

	Introduction 7m 45s Click here for video
	'Business in Crisis' 5m 24s Click here for video
	Managing relationships when you are in business for yourself 6m 00s Click here for video
	The early years 4m 54s Click here for video
	Basic Business Errors 10m 01s Click here for video
	Managing Debt 7m 04s Click here for video
	Rocket Science 3m 04s Click here for video
	Surviving the Hard Times 5m 17s Click here for video
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	Crash Without Cash 8m 54s Click here for video

Building Relationships
ICA Summit 2009

At our very successful Summit on 12 November, we brought together a unique group of presenters from small and big business, government, academia and the research arena. Conference Presentations are here.

... Unquote

Illegal workers/Phoenix companies

Two ICA members' tell their stories
ATO information on reporting suspect activity.

The Pessimists' Economic Views
(Posted January 2010)

We've brought together some pessimistic views about economics and likely economic trends in 2010:
Ken Phillips's summary
The Atlantic
Pivot Capital
New York Times
Business Spectator
Wall Street Journal
Investors Insight
Reuters
The Telegraph
New York TImes

Update June 2009

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

19 per cent of the Australian workforce are independent contractors, which equates to 2.03 million persons. [2008]

When this is analysed further:

28 per cent of the private-sector workforce are independent contractors. [NB: This is based on 2004 figures.¹]

The increase in the number of self-employed between 2006 and 2008 (6.6 per cent) has been larger than the increase in the total workforce (4.9 per cent).

Self-employed persons

Total Workforce

November 2008	10.6 million
November 2006	10.1 million
November 2004	9.6 million

Increase in the number of self-employed 2006-2008: 126,800 (6.6 per cent increase)

ICA comment on November 2008 figures (Comment made in June 2009)
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:

People who provide their time and labour and who only manage themselves. The ABS tags these people as "independent contractors".
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

Just How Many Are There?

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.

2.03 million
self-employed

Their interests are our interest

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