An exploration of the professional contractual (non-employment) … Dalby Thesis.pdf ·...

An exploration of the professional contractual (non-employment) tripartite

relationship (CTR).

William T. Dalby.

B.Tech. Mech. Eng. Grad Cert Mana.

Supervisor. Associate Professor. Amanda Gudmundsson.

Submitted in fulfilment of the requirements for the Degree of Doctor of Business

Administration.

QUT Business School.

Queensland University of Technology.

2018

Contractual Tripartite Relationship

1

ABSTRACT

Over the last 50 years the traditional employment paradigm has steadily been

challenged with the growth of flexible work arrangements in most countries of the

developed world resulting in a staggering amount of contract work and a number of

other flexible work arrangements where people exchange their labour for reward

without being technically employed by their host (Johnstone, McCrystal, Nossar,

Quinlan, Rawling, & Riley, 2012), i.e. contract, supply chains, franchises and bailment.

Indicating the size and scope of this change, the ‘Ai GROUP Workforce Development’

predict that “In the U.S. alone, contingent workers will exceed 40% of the workforce

by 2020” (Intuit, 2010, p. 21). A similar outcome is expected for Australia given that

in 2015 it was reported “nearly one third of the [Australian] workforce [were] taking

part in freelance work” (Chung, 2015, p. 1).

These flexible work arrangements in Australia have brought some serious

difficulties for the lower skilled industrial blue-collar workers where the supply of

labour outstrips demand, resulting in lower wages and insecurity. However, in the

white-collar highly skilled technical sector where skills are rare and in demand,

especially in times of mining and resource booms, then the contractual tripartite

relationship (CTR) has provided many benefits to its actors including good rates and

security. Unfortunately, these benefits have also brought confusion as to how the CTR

should really operate. The purpose of the current program of research was to explore

the experience of the three cohorts engaged in a CTR relationship within the minerals

and exploration industry.

To examine the many facets of the CTR this research was deliberately

approached using a mixed methodology. Initially using a qualitative face-to-face

interview technique to explore the lived experiences of the actors i.e. contractors,

agents and hosts, followed by a confirmatory qualitative survey. Thirty-three face-to-

face interviews were performed and 36 electronic surveys were returned from similar

actors from all three cohorts.

At the time of conducting this research the CTR topic was nascent, consequently

this research was exploratory and highlighted many important topics. For example,

the reasons why the actors chose to become involved in a CTR, sham relationships,

legislation, insurances, power imbalances, internal and external pressures on the CTR,

loyalty, flexibility, taxation and life-style. Interestingly, the findings revealed that

the overwhelming the population of actors were unsure of their liabilities and


2

responsibilities regarding the employment, or engagement of the contractors. They

did not really know which actor employed or was responsible for the contractors, yet

in spite of the potential penalties for not employing a worker properly, none of the

actors wanted the system to change as they all benefitted in some way from the

relationship, either financially, professionally or socially.

Much exploratory data was gleaned from this study and it is now available for

future researchers to continue to research this topic and to generate a new

management theory to explain the idiosyncrasies of the CTR. Additionally, the

outcomes of the research demonstrate that Australian lawmakers need to be brought

into the debate to enable practical and simple solutions to this industrial phenomena,

as it is evident that all actors of the CTR relationship require this clarity.

Key Words: contractor, agent, host, contract, employment, engagement.


3

TABLE OF CONTENTS

ABSTRACT 1

TABLE OF CONTENTS 3

LIST OF FIGURES 5

LIST OF TABLES 6

STATEMENT OF ORIGINAL AUTHORSHIP 8

ACKNOWLEDGEMENT 9

SUMMARY OF DEFINITIONS 10

CHAPTER ONE 14

1.0 INTRODUCTION AND OVERVIEW 14 1.1 THE EMERGENCE OF THE TRIPARTITE RELATIONSHIP 18 1.2 TRIPARTITE RELATIONSHIP 22 1.3 INDIRECT AND DIRECT CTR 23 1.4 DEPENDENT AND INDEPENDENT CONTRACTORS 26 1.5 PROBLEMS 33 1.6 AIM OF THE STUDY 34 1.7 INTERACTIONS WITHIN THE CTR. 35 1.8 GAPS IN THE THEORETICAL AND EMPIRICAL LITERATURE 37 1.9 METHODOLOGY OVERVIEW 38 1.10 SUMMARY 39

CHAPTER TWO 42

2.0 LITERATURE REVIEW 42 2.1 AGENCY THEORY 43 2.2 PSYCHOLOGICAL CONTRACT THEORY 52 2.3 THEORY OF POWER 64 2.4 GAP IN THE LITERATURE 70 2.5 IMPLICATIONS FOR THIS STUDY 76 2.6 GENERAL LITERATURE 77 2.7 SUMMARY 79

CHAPTER THREE 80

3.0 OVERVIEW 80 3.1 RESEARCH DESIGN METHODOLOGY 80 3.2 PHASE 1, INTERVIEW METHODOLOGY 82 3.3 PHASE 2, SURVEY METHODOLOGY 94

CHAPTER FOUR 98

4.0 OVERVIEW 98 4.1 THE WIDER CONTEXTUAL DATA 105

CHAPTER FIVE 139

5.0 STRUCTURE OF CHAPTER FIVE 139 5.1 AGENCY THEORY FINDINGS 139 5.2 PSYCHOLOGICAL CONTRACT THEORY FINDINGS 153 5.3 THEORY OF POWER, FINDINGS 169


4

5.4 ALTERNATIVE ENGAGEMENT APPROACH, AND FINDINGS 177

CHAPTER SIX 180

6.1 INTRODUCTION 180 6.2 WIDER CONTEXTUAL TOPICS - KEY FINDINGS 183 6.3 FUTURE DIRECTION 186 6.4 LIMITATIONS 190 6.5 IMPLICATIONS FOR FUTURE RESEARCH 191 6.6 FUTURE RESEARCH AND GENERAL COMMENT 192

APPENDICES 195

APPENDIX A 195 Landmark Cases 195 APPENDIX B 198 International penetration of agency workers as a percentage of the total country workforce 198 APPENDIX C 199 Differences between employees and contractors. (Australian Government, 2006). 199 APPENDIX D 201 Alienation of Personal Services Income Act 2000.(80% rule, or 80/20 rule) 201 APPENDIX E 203 Sample of the formal inquiries and investigations since 2000 203 APPENDIX F 205 Participant information sheet and consent form – Agent 205 APPENDIX G 209 Participant information sheet and consent form – Contractor 209 APPENDIX H 213 Participant information sheet and consent form – Host 213 APPENDIX I 217 Additional findings 217 APPENDIX J 255 Cases that have awarded penalties 255 APPENDIX K 256 Nodes for Nvivo 256 APPENDIX L 257 Interview protocols 257 APPENDIX M 263 Quantitative Surveys 263

TABLE OF REFERENCES 289


5

LIST OF FIGURES

Figure 1 Percentage penetration and distribution of contractors by occupation and gender

20

Figure 2 Labour-hire tripartite employment relationship

23

Figure 3 Indirect contractual tripartite relationship (CTR)

24

Figure 4 Functionality of Indirect contractual tripartite relationship

24

Figure 5 Direct contractual tripartite relationship 25

Figure 6 Functionality of direct contractual tripartite relationship

25

Figure 7 Continuum of contracting independence: employee to consultant

27

Figure 8 Interaction within the tripartite relationship over time

36

Figure 9 Psychological contract pressures 55

Figure 10 Temporal development of psychological contract

57

Figure 11 Sequential exploratory design 81

Figure 12 Indirect relationship. Who employs the contractor

110

Figure 13 Direct relationship. Who employs the contractor

111

Figure 14 Agency theory. Goal alignment 143

Figure 15 Indirect relationship. Psychological contract theory. Loyalty

155

Figure 16 Direct relationship. Psychological contract theory. Loyalty

155

Figure 17 Psychological contract theory. Loyalty change over time

158

Figure 18 Psychological contract theory. Expectations given

160

Figure 19 Psychological contract theory. Expectations received

160

Figure 20 Direct relationship. Theory of power 171

Figure 21 Indirect relationship. Theory of power 171

Figure 22 Theory of power. Power change over time 173


6

LIST OF TABLES

Table 1 Commonly used definitions for contractors 30

Table 2 Table of mutual obligations in a CTR 53

Table 3 Sample of nodes showing parent, child and grandchild nodes

92

Table 4 Screenshot of quantitative analysis of the qualitative data

94

Table 5 Responses to surveys and interviews 99

Table 6 Demographics of the contractors 100

Table 7 Average length of the contracts 100

Table 8 Where does the contractor work 101

Table 9 Integration, control, and contractual conditions

101

Table 10 Reasons to be involved in a CTR 103

Table 11 Additional reason to be involved in a CTR 104

Table 12 Who employs the contractors in a direct relationship?

107

Table 13 Who employs the contractors in an indirect relationship?

108

Table 14 Survey findings. Who employs the contractors in an indirect and direct relationship?

111

Table 15 Sham arrangements 114

Table 16 Responsibilities 117

Table 17 Survey findings. Responsibilities 119

Table 18 Insurances 121

Table 19 Survey findings. Insurances 123

Table 20 General taxation 124

Table 21 Survey findings. Taxation 126

Table 22 80/20 rule 127

Table 23 Legislation 130

Table 24 Survey findings. Legislation 131

Table 25 Confusion 133

Table 26 Wider contextual data 137

Table 27 Survey findings. Asymmetrical information 140

Table 28 Asymmetrical information 142

Table 29 Survey findings. Goal alignment 143

Table 30 Goal alignment 145

Table 31 Survey findings. Outcome uncertainty 145

Table 32 Outcome uncertainty (risk) 147

Table 33 Financial risk 149

Table 34 Survey findings. Financial risk 150

Table 35 Incentives 151

Table 36 Survey findings. Incentives 152

Table 37 Loyalty 154

Table 38 Survey findings. Loyalty 155

Table 39 Loyalty changing over time 156


7

Table 40 Survey findings. Loyalty change over time 158

Table 41 Expectations 159

Table 42 Survey findings. Expectations 160

Table 43 Were the expectations met? 161

Table 44 Internal pressures 162

Table 45 Survey findings. Internal pressures 164

Table 46 External pressures 165

Table 47 Multiple psychological obligations 167

Table 48 Supervision and power 169

Table 49 Survey findings. Power, direct and indirect 170

Table 50 Power change over time 172

Table 51 Survey findings. Power change over time 174

Table 52 Conflict 175

Table 53 Survey findings. Conflict 176

Table 54 Is there a better alternative to CTR? 178

Table 55 Survey findings. Joint employment 179

Table 56 International penetration of agency workers as a percentage of the total country workforce

198

Table 57 Differences between employees and contractors

199

Additional findings

Table 58 Reason to be involved in a CTR 217

Table 59 Employment v engagement 220

Table 60 Sham relationships 222

Table 61 Responsibility 225

Table 62 Insurances 227

Table 63 Tax general 229

Table 64 Tax 80/20 rule 230

Table 65 Confusion 232

Table 66 Asymmetrical information 235

Table 67 Outcome uncertainty 237

Table 68 Financial risk 239

Table 69 Loyalty 242

Table 70 Expectations 245

Table 71 Internal pressures 246

Table 72 External pressures 247

Table 73 Supervision and power 248

Table 74 Additional confused comments from the contractors

251

Table 75 Additional confused comments from the hosts

252

Table 76 Additional confused comments from the agents

254


8

STATEMENT OF ORIGINAL AUTHORSHIP

The work contained in this thesis has not been previously submitted to meet

requirements for an award at this or any other higher education institution. To the

best of my knowledge and belief, the thesis contains no material previously published

or written by another person except where due reference is made.

Signature: QUT Verified Signature.

Date: APRIL 2018.


9

ACKNOWLEDGEMENT

I would like to express my deepest gratitude to my supervisor who has gently

steered me through this research with much skill and knowledge. She has always been

supportive and encouraging.

A very special appreciation to my wife for putting up with many hours of solitude.

The study would not have been possible without her support and sacrifice.

A special appreciation to the following peak bodies for assisting with the issuing

of the surveys: -

Recruitment International UK (RI).

Association of Professional Engineers, Scientists and Managers, Australia

(APESMA).

Recruitment and Consulting Services Association (RCSA).


10

SUMMARY OF DEFINITIONS

The more fundamental and commonly used definitions for this research are

shown here.

Blue-collar workers: -

Refers to employees whose job entails (largely or entirely) physical labo[u]r, such as

in a factory or workshop (blueCollar.Businessdictionary.com, 2017 para. 1).

Casual employee: -

Employees who are not entitled to holiday pay or sick leave (Australian Bureau of

Statistics, 2010).

Client or Host or Employers: -

Persons who operate their own unincorporated enterprise, or engage independently

in a profession or trade, and hire employees or engage contractors (Waite, Will, &

Australian Productivity Commission, 2001 p. viii).

Contracting services: -

A commercial (business to business) service where an organisation, in return for a

fee, completes a defined scope of work for a third party (client). Such services may

be performed utilising employees or sub-contractors employed or engaged by the

service provider (RCSA, 2012 p. 4.).

Contractor: -

Anyone who operates his or her own enterprise or engages independently in a

profession or trade, and is engaged by a firm or organisation for some determined

‘all-inclusive” fee to provide a defined service for a specific period (VandenHeuval &

Wooden, 1995 p. 265).

Contingent employment: -

Conditional and transitional employment relationship … associated with part-time

jobs and job instability (Rassuli, 2005 p. 691).

Dependent contractor: -

The Dependent contractor operates its own business and is normally engaged on a

http://www.businessdictionary.com/definition/employee.html

http://www.businessdictionary.com/definition/job.html

http://www.businessdictionary.com/definition/entail.html

http://www.businessdictionary.com/definition/labor.html

http://www.businessdictionary.com/definition/workshop.html


11

commercial contract but with work arrangements consistent with them being an

employee (Waite, Will, & Australian Productivity Commission, 2001 p. viii).

A category of worker that fall into the “grey” area between employees and

independent contractors (Greene, 2000 p. 194).

Dependent contractors are entities who are generally in a position of dependence

upon and under an obligation to perform work for another person (Plevitz, 1997 p.

268).

Employment agent: -

The firm or person carrying on a business for gain, offers to find casual, part-time,

temporary, permanent or contract work for a contract worker, or for a person

(Commonwealth of Australia, 2011).

Employee: -

Employees are engaged under a contract of service and take directions from their

employers/supervisors/managers/foreman on how the work is performed (ABS Cat.

No 6203.0) (Commonwealth of Australia, 2011).

Employment contract: -

Involves a worker (the employee) agreeing to perform work for someone else’s

organisation in a subordinate capacity.

At common law, a contract of service exists between a person who pays for work to

be performed and the performer of the work. This excludes a range of contract

workers (Stewart, 2005).

iPro: -

Highly-skilled self-employed independent professional (Leighton & Mckeown, 2015

para. 1).

Independent contractor: -

Independent contractors are people who operate their own business and who

contract to perform services for others on a commercial contract and with work

arrangements inconsistent with them being an employee (Waite, Will, & Australian

Productivity Commission, 2001 p. viii). Independent contractors are


12

engaged under a contract ‘for’ service, (a commercial contract) (Commonwealth of

Australia, 2011).

Genuine independent contractors are generally: -

• paid for results achieved

• required to provide all or most of the necessary materials and equipment to

complete the work

• free to delegate work to others

• free in the way they work

• required to provide services to other businesses

• free to accept or refuse work

• in a position to make a profit or loss


Labour-hire: -

Is a form of an indirect employment relationship in which the employer (the agency)

supplies its employees to work at a workplace controlled by a third party (the host)

in return for a fee from the host. A typical agency will direct an employee to work

for a host for a period (assignment) ranging from a single day to a number of years

(Power, 2002 p. 64).

Multi-agency relationship: -

Cooperation between several organisations, especially in social work.

Precarious work: -

Precarious work is associated with part-time employment, self-employment, fixed-

term work, temporary work, on-call work, home working and telecommuting…all

tend to be distinguished by low wages, few benefits, the absence of collective

representation, and little job security (Fudge & Owens, 2006).

Self-employed: -

Self-employment is linked to entrepreneurship …the ownership of the means of their

production and self-direction or autonomy in their work (Dale, 1986 para. 1).

Self-employed contractor: -


13

A self-employed contractor can be an independent or dependent contractor who

operates in either a direct or indirect manner to the host. “They operate their own

business’, sometimes with no employees and they predominantly provide labour

services to their hosts (Waite, Will, & Australia Productivity Commission, 2001 p.

viii).

Sham agreement: -

Where an employer deliberately attempts to disguise an employment relationship as

an independent contracting relationship (Australian Government, 2009).

White-collar workers: -

White-collar workers usually perform job duties in an office setting. They are highly

skilled and formally trained professionals …. White-collar workers, such as engineers

and architects, provide services to businesses, corporations and government

agencies. White-collar jobs generally pay well because of the education level

required for entry into most occupations (Scott, 2016 para. 3).

Worker: -

The person supplying labour who generally is employed on a contract ‘of’ service.

CHAPTER ONE

1.0 INTRODUCTION AND OVERVIEW

As contemporary organisations adapt to increasingly competitive and

dynamic environments they transform the way in which human capital is engaged

and deployed. Like most developed economies, Australia’s previous industrial era

was dominated by vertically structured employer/employee relationships, which

are now being supplemented with non-standard peripheral or contingent

relationships such as part-time, temporary, self-employment, subcontract work

arrangements (including supply chains and franchises), labour-hire (Johnstone et

al., 2012), and contract workers (Mckeown & Cochrane, 2012).

The rapid growth of this phenomenon since the 1980s is particularly evident

in the white-collar professional fields, where the non-employment or contractual

tripartite relationship (CTR) and its operational framework have burgeoned within

Australia’s mining, engineering, construction and information technology (IT)

industries. Some authors suggest that the growth in the popularity of the CTR has

arisen because it supports increasing profitability and flexibility (Wheelwright,

2004) for all of the actors, i.e. the agents, contractors and hosts, within the

relationship (Toms & Biggs, 2014).

Regrettably, where the CTR is misunderstood or mismanaged either

deliberately or innocently, it can generate some significant disadvantages for all

three groups of actors. Problems have included breaches of employment and/or

taxation laws with financial penalty outcomes (Herbert Smith Freehills LLP, 2013),

(see Appendix A). Poorly managed or ignored relationships can also lead to poor

occupational health and safety (OHS) statistics for the contractors (Johnstone and

Quinlan, 2006), ‘goal conflicts’ and ‘agency problems’ (Eisenhardt, 1989), plus

asymmetrical power relationships (Gunasekara, 2011; Harvard, Rorive & Sobczak,

2009) resulting in poor management and performance outcomes. Unfortunately,

managerial process or contractual recommendations for improving the

performance, experience and outcomes of the CTR are scant as limited empirical

research or understanding exists on this emergent relationship.

Even with the potential disadvantages of the CTR, it has enjoyed a rapid

growth in Australia over the past 35 years. Consequently, the focus of this

research is the professional white-collar CTR, where contractors are either

engaged ‘indirectly’ to a host organisation using an agent organisation as an

intermediary (Figure 3), or where the contractors are engaged ‘directly’ by the


15

host without the involvement of the agent (Figure 5). In both styles of CTR, the

contractors in Australia are commonly engaged or employed by their own entities,

i.e. a limited liability company, partnership, sole proprietorship (sole trader), or

trust, and may, therefore, be defined as ‘self-employed’ (see Summary of

Definitions p. 12). The contractor cohort under investigation in this thesis is

therefore engaged differently to the labour-hire or on-hired agency employees

who remain employees of the intermediary agent.

As the application of the CTR has broadened across Australia’s industries a

number of challenges associated with defining this engagement relationship have

emerged. Difficult litigious questions arose in the 1980s surrounding the definition

of the contractors, specifically regarding whether the contractors were actually

employees of the host or whether they were genuine independent entities.

Unfortunately, a number of legal challenges with divergent outcomes have

resulted in different approaches to defining the employment status of these

contractors. For example, the Building Workers Industrial Union of Australia v.

Odco Pty Ltd (t/a Troubleshooters Available) (1991) referred to as ‘the Odco case’

(see Appendix A, 1.0) held that engaging workers on a commercial contract

relationship did not give rise to an employment relationship. Yet in the Stevens v.

Brodribb Sawmilling Company Pty Ltd (1986) referred to as the Stevens v Brodribb

case, (see Appendix A, 2.0) the conclusion was more ambiguous, finding that an

employment determination should be based upon a collection of factors (Plevitz,

1997).

The Hollis v Vabu Pty Ltd [2001] HCA 44 referred to as the Hollis v Vabu case

or Crisis Courier case (see Appendix A, 3.0) delivered another landmark case

where the court determined that an independent bicycle courier was an employee

of Vabu resulting in Vabu being vicariously liable for the couriers’ activities, even

though the couriers were engaged under a contract and therefore not as

employees.


16

A further complication arose out of the Oanh Nguyen and ANT Contract

Packers Pty Ltd and Thiess Services Pty Ltd [2003] NSWIRComm 1006 case,

referred to as the Nguyen v Theiss case (see Appendix A, 4.0) where the

commission raised the possibility of ‘joint employment’ of the worker by both

actors (i.e., the host and the agent) (Wheelwright, 1994). Consequently, since the

late 1980s, the three actors of the CTR i.e. the hosts, the employment agents,

and the contractors have remained unsure about the employment status of the

contractors who operate through an interposed entity and therefore are unclear

about how to manage the complex multiple relationships of the CTR.

It is plausible to suggest that the lack of definitional clarity, the plethora of

mixed contractor definitions (Guest, 2004) (see Table 1), and the number of

inconsistent legal outcomes have enabled some actors to use clandestine

activities to avoid their liabilities (Burgess & Connell, 2004), or to disguise their

true employment relationship (Kaufman, 2010). Other actors have remained

uncertain as to the true nature of their employment or engagement status,

especially in situations where the contractor has been engaged under the

direction and control of one host for a lengthy time period (e.g., in some cases

longer than 12 months) without risk and in a similar manner to that of an

employee.

In the empirical literature, the lack of definitional clarity has also resulted in

unique and incompatible research outcomes, providing future research with a lack

of guidance and difficulty in hypothesis generation (Cappelli & Keller, 2013),

further obscuring an already problematic field of enquiry. Moreover, while there

is an emerging shift in business from full-time on-going employment to more

flexible employment/engagement systems worldwide (Burgess & Connell, 2004),

there has been very little research within Australia or in the Organisation of

Economic Cooperation and Development (OECD) countries on the topic of

contractors who are not employed by a labour-hire agent. Consequently, there is

little academic literature or theories available to predict or guide the


17

development, maintenance and evaluation of the CTR with any certainty or

authority.

Accordingly, the aim of the current program of research is to explore the

experiences of agents, hosts and contractors who are engaged in a CTR within

Australia’s mining, construction and engineering industries. The ambition of the

research is to generate insights that will ultimately provide guidance for the

management of these relationships and enable all of the actors within the

relationship to obtain a clearer understanding of the nature of the relationship

and each other’s respective operational responsibilities.

The current research is exploratory and will be facilitated using a mixed

research methodology incorporating qualitative interview and survey studies. The

initial inductive and grounded phase of the research will gather the lived

experiences, impressions and attitudes of the three groups of actors (agents,

contractors and hosts) through a process of semi-structured face-to-face

interviews.

The data gleaned from the initial inductive and the grounded process will

then be used to inform the development of a qualitative survey that will be

deployed to the second set of representative participants of each of the three

groups of actors. Again exploratory, the purpose of the survey is to triangulate the

results gathered during the first phase of the research and will examine the

association between distinctive characteristics and elements of the CTR and

perceived outcomes.

The data from this exploratory study can be used to potentially serve as a

platform to provide more detailed future research into the phenomenon. The

outcomes of the research will also be used to write a ‘White-Paper’ to inform the

government of the outcomes of the research and to recommend action to reduce

the confusion that may exist within the relationship.


18

1.1 THE EMERGENCE OF THE TRIPARTITE RELATIONSHIP

As the negative impact of industrial deregulation and globalisation upon

Australia’s manufacturing sector was becoming apparent during the late 1980s

(OECD, 1985/86; Conley, 2004; Vettori, 2007), Australia’s policy makers sought to

create a more cost-effective, flexible and productive industrial landscape.

Australian industry and government realised that a change was needed from the

economic protectionism and labour-management dichotomy that had been in

existence since federation, to a more liberal economic policy. The result was a

retreat of bureaucracy and an advance of the free-market (Barley & Kunda, 2006),

with industrial firms seeking to reduce overheads to maintain their international

competitiveness (Coe, 2007), and a change in employment norms from the

standard employment contracts to precarious and more flexible employment

regimes (Fudge & Owens, 2016).

One method of creating flexibility was to hire-in skills via an employment

agent on a temporary or ‘as-needed’ basis rather than permanently employing

those skills and absorbing the associated costs on a permanent basis. Such a

subcontracting system of employment was not a new phenomenon in Australia;

indeed, the subject of subcontracting labour was mentioned as early as 1854 in

Adelaide’s South Australian Register (Argus, 23 November 1854 p. 5-6, cited in

Quinlan, 2012). While the notion of subcontracting may not have been uncommon,

it was predominantly used for project-based contracts undertaken by blue-collar

sub-contractors on a labour-hire basis (Quinlan, 2012).

The sub-contracting method of employment temporarily subsided within

Australia around 1945 because of a combination of the Curtin government’s

adoption of Keynesian full employment policies, the influence of the unions, and

the long post Second World War economic boom (Quinlan, 2012). However, sub-

contracting resurfaced again in the early 1980s when host organisations adopted

more neoliberal policies and de-collectivist industrial relations (Johnstone et al.

2012) enabling them to minimise employment costs, to improve their efficiency

and to compete internationally. Secondary benefits were also available to the


19

hosts as they could also reduce the influences of the unions, overcome their

recruitment problems and circumvent staff ceilings (Holmes, 1986, cited in

Mckeown & Hanley, 2009). Since the 1980s, fuelled by rapid growth and expansion

of the mining and construction sectors within Australia, significant demand for

white-collar technical specialists emerged resulting in many large consulting firms

recruiting numerous white-collar engineering, construction, design and IT

contractors to satisfy their peak workload demands.

This strong demand for white-collar technical specialists also spurned the

growth of the employment agency business within Australia, with a number of

international recruitment companies, such as Adecco and Manpower, expanding

into and across Australia to service the available market niches (Burgess & Connell,

2004). This in turn also improved the market growth of the CTR with a number of

agents in some circumstances ‘market-making’ by encouraging individual

technical specialists to incorporate and become engaged by the agents as

contractors rather than being employed by the agents as employees (Coe, Johns,

& Ward, 2008).

Even with the 2008 global financial crisis and its economic downturn, the

Australian Bureau of Statistics (ABS) indicated that in 2014 approximately 8.6% of

the total number of employed Australians were engaged in some form of tripartite

relationship (74% of whom were male) (Australian Bureau of Statistics, 2015). The

ABS figures also indicated that in 2015 there was 161,200 total (full-time 101,100

and 60,100 part-time) independent contractors engaged in the professional,

scientific and technical service industry (Australian Bureau of Statistics, 2015).

Internationally the statistics regarding the CTR are similarly impressive. The

European Community reported a 45% growth in contractually engaged, self-

employed, highly-skilled individuals from 6.2 million in 2004 to 8.9 million in 2013

(Leighton & Brown, 2013). Global estimates in 2007 also suggested that the

general temporary agency industry (blue and white-collar) was worth

approximately US$ 200 billion annually and that Australia’s temporary staffing


20

market was the seventh most valuable market in the world at that time (Coe,

2007) (see Appendix B).

With the benefit of hindsight, it has been argued that Australia’s

deregulation of the labour market, and the industrial relations reforms in the

1990s had little impact on trade capacity and global economy investment (Graham

& Harcourt, 1998). However, the increased labour market flexibility that ensued

enabled the CTR to become such a popular method of engaging workers that it

became widely accepted in the white-collar professional, technical, and

information technology (IT) consulting sectors. More recently the CTR has been

adopted in the brown-collar, warehousing, postal, health and social assistance

sectors of Australia’s industrial landscape. Figure 1 highlights the distribution of

independent contractors by occupation and gender as a percentage of the

penetration into their relevant occupations, indicating just how wide and deep

independent contracting has spread across and into Australia’s industry (ABS,

2014). Please note that the definition of ‘Independent contractor’ used by ABS is dissimilar to other

definitions and therefore may contain more workers than other definitions.

Figure 1. Percentage penetration and distribution of contractors by occupation and gender. Source derived and from ABS 2014 (Forms of Employment Survey: Australia, Cat No. 6333.0).

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Red,Female:Blue,Male


21

The ABS figures indicate that male independent contractors in full-time

‘employment’ penetrated the following sectors; mining (42.6%), information

media (37.4%), accommodation and food services at (36.3%), and finance and

insurance (33.7%). Interestingly, the penetration of female independent

contractors in full time ‘employment’ is similarly significant with the highest

proportion being engaged in finance and insurance (48.3%), followed by real

estate (47.5%), transport and postal services (39.5%), and clerical and

administrative workers (16%). While some female independent contractors are

also engaged within the white-collar, IT and engineering disciplines, the most

popular sectors for female independent contractors, with the exception of the

construction sector, are outside the scope of this thesis.

The previous statistics demonstrate that many thousands of people go to

work every day across Australia engaged in a CTR. Unfortunately, the challenges

associated with attempting to define the boundaries of the relationship may have

resulted in a substantially different understanding and sets of expectations about

how the relationship operates. Some relationships may have three different

opinions (one from each actor) about, for example, who is responsible for the

contractor’s performance, or who should insure the contractor or who should

manage the contractor, or whether any one of the actors is innocently or

vicariously at financial or legal risk should the contractor cause an accident or be

injured. Given the demonstrated growing organisational demand for the use of

non-standard work arrangements over the past thirty years (Johnstone et al.

2012), it is important that empirical research critically examines the operation of

CTR.

The ABS (2015) evidence has revealed that the white-collar professional

engineering sector provided a strong and continuous demand for the skills of

technically qualified white-collar contractors since the 1980s. Such demand for

highly skilled white-collar contractors has enabled the contractors to attract rates

well above the standard employment awards and to enjoy the benefits of their

contractor status (Payscale Human Capital, 2016), unlike the blue-collar cohort,


22

which suffered from vulnerability and negative features over the same period. Not

only have the white-collar contractors benefited over this period but the hosts

have also learned to minimise their liabilities and costs, while the agents have

profited from the service they provided to the host. However, when this

particular CTR is explored more deeply the concerns faced by all actors become

evident, as the CTR is complex and has the potential to be replete with

challenges and confusion.

1.2 TRIPARTITE RELATIONSHIP

The more common labour-hire or on-hire tripartite employment relationship

(see Figure 2) exists where an individual worker is engaged by an employment

agent as an employee of the agent on a “contract of services” and then on-hired

to perform work for a host organisation in the host’s premises, where the host has

day-to-day control over the agent’s employee (Power, 2002). The agent is the

employer of the on-hired employee and performs the payroll duties and invoices

the host for the hours worked by their employee on a regular basis. Within this

labour-hire tripartite relationship an employment contract exists between the

agent and the employee, and a commercial contract “contract for services” exists

between the host and the agent. The labour-hire worker is not an employee of

the host organisation (Fair Work Ombudsman, 2011).

There is a clear definition at common law in Australia that states that the

workers in a labour-hire ‘employment’ tripartite relationship are clearly defined

as employees of the agent (Stewart, 2009), with the actors of this tripartite

relationship certain of their responsibilities and obligations. This relationship is

not the focus of this study.


23

Figure 2. Labour-hire tripartite employment relationship.

1.3 INDIRECT AND DIRECT CTR

The ‘indirect’ CTR (multiple agency relationship) is one where the

contractor provides services to a host and receives remuneration via an agent or

another interposed entity (owned by the contractor). The agent sources a short

list of contractors for the host, who will then make a final decision as to which

contractor to appoint. The agent contractually engages the contractor and

invoices the host for the contractor’s services on a regular basis and includes a

margin. The agent engages in a contract ‘for’ service with the host and a contract

‘of’ service with the contractor’s entity. The contractor’s interposed entity then

employs and remunerates the contractor. The ‘indirect’ CTR is depicted

graphically in Figure 3.

Figure2.0.Labour-hiretripar teemploymentrela onship

HOST

AGENT LABOUR-HIRE CONTRACTOR “EMPLOYEE”


24

Figure 3. Indirect contractual tripartite relationship (CTR).

Figure 4. Functionality of indirect contractual tripartite relationship.

The functionality of the indirect CTR (see Figure 4) highlights that the

services provided by the contractor’s entity directly to the host are remunerated

by the host via the agent. Lastly the contractor is remunerated by the

contractor’s entity. The ‘direct’ CTR (multiple agency relationship) is similar to

the indirect CTR except that the agent is removed (see Figure 5).

Figure3.0.Indirectcontractualtripar terela onship(CTR)

HOST

ENTITY AGENT CONTRACTOR oremployee


25

Figure 5. Direct contractual tripartite relationship.

Figure 6. Functionality of direct contractual tripartite relationship.

In both variants of the CTR (either direct or indirect) the contractors

operate through their own entities and are thus not legal employees of the host or

the agent as they are governed by commercial contract law (Stewart, 2009). As a

Figure5.0.Directcontractualtripar terela onship(CTR)

HOST

ENTITY

CONTRACTOR oremployee

Figure6.0.Func onalityofdirectcontractualtripar terela onship

HOST

ENTITY

CONTRACTOR

(oremployee)


26

consequence, within this thesis these relationships will be defined as non-

employment or contractual tripartite relationships (CTRs), where the contractors

generally perform their work within the hosts’ premises rather than from their

home offices or from remote locations, and where the contractors’ entities will

either invoice the agent (as is the case in an indirect relationship), or the host (as

is the case in a direct relationship) (Wheelwright, 2004). After the contractor

invoices the agent, the agent will in turn invoice the host for the contractor’s

work and include its margin and any additional fees or charges.

Fees for services are generally based on hourly rates rather than lump sum

payments, as the contracts are mostly behavioural based rather than outcome-

based where remuneration would only be provided when the contractor has

delivered an outcome (Ng, Maull, & Yip, 2009). In either situation the contractor

is controlled by the host and integrated into the host’s premises until the

assignment is complete or until the host has no further need for the contractors’

specialist skills, at which stage the agent will try if requested to find the

contractor its next contract. Where the contractor operates in a direct manner,

i.e. without an agent, then at the end of his/her contract the contractor will try

to find further assignments using their network of similar contractors or ex-hosts.

Further, in the indirect relationship, the agent’s office is normally remote from

the premises of those of the host and the contractor. However, in recent times

particularly in the United States of America (USA), some hosts are now embedding

agents into their premises so that the host can continue to claim that it is the

agent who manages the contractor and is therefore responsible for the

contractors’ work.

1.4 DEPENDENT AND INDEPENDENT CONTRACTORS

Generally, the contractors within either the direct or indirect CTR use their

own interposed entities to trade through, as they are self-employed (see Summary

of Definitions). This gives the contractors the option of either employing

themselves using a contract of employment or engaging themselves using a

contract for services. Irrespective of their own entity structure the contractors


27

tend to fall into two categories i.e. dependent and independent, subject to how

they provide their services (Devine, 2008).

Dependent contractors are those who are ‘dependent’ upon a single host

organisation and tend to work for one host at a time, often for long periods of

time without financial risk, and without their own staff or premises. In contrast

independent contractors tend to provide their services to more than one host at a

time and often operate in a more consultative style with their own employees and

premises. As such they operate ‘independently’ and are generally at financial risk.

The differences between a dependent and an independent contractor (see Figure

7) are highlighted on a continuum the types of contractors (O’Donnell, 2004).

Figure 7. Continuum of contracting independence: employee to consultant.

At the ‘employee’ end of the continuum the contractor performing the work

is engaged by a host employing organisation, either via a labour-hire agent or the

contractor’s own entity using a contract ‘of’ service as an employee for wages,

without financial risk or able to delegate their responsibilities. Further, they

would generally be employed by the agent (or the contractor’s entity) either on a

permanent, or casual or behavioural contract basis. Whereas at the opposite end


28

of the continuum there are contractors providing a service for remuneration as

consultants under a contract ‘for’ services (Stewart, 2009). These consultants

generally have their own offices and staff and they take financial risks, plus they

may perform services for more than one client simultaneously. These contractors

are also able to delegate their tasks and be remunerated on a lump-sum basis

upon successful completion of an outcome-based contract. For a comparison of

independent contractor criteria compared to the criteria for an employee as

supplied by the Australian Government (see Appendix C).

In Australia where there is a great variety of methods of engaging labour,

there are businesses that try to abdicate their legal responsibilities by distancing

the contractors from their control (Marshall, 2006). Consequently, some of the

white-collar professional, technical and IT contractors in the mining, construction

and engineering industries typically sit between these two boundary positions on

the continuum with a mix of dependent and independent features. Contractors

may be engaged in a similar manner to that of an employee of the host, and are

therefore generally integrated and controlled by the host for most, if not all, of

the working week on behavioural contracts. However, they may not be

remunerated in the same manner as employees, as their remuneration is generally

paid to their entity name by either the agent (indirect) or the host (direct) on an

hourly, on-going basis as stipulated in their contractual agreement.

It is also suggested that many of the dependent and some of the

independent contractors tend not to be responsible for correction of their work,

as their hosts are likely to direct their effort, and neither are these contractors

likely to be at financial risk as would be expected of genuine independent

contractors. These types of dependent yet pseudo or quasi-independent

contractors (Stone, 2016) are generally engaged on a contract ‘for’ service

(regardless of whether they should be or not), either via an agent or via their own

entity, and they do not expect to receive leave or sickness benefits as their hourly

rates are generally inflated to cover this. Further, as they may not be employees

of either the host or the agent, then it is also suggested that they are not


29

afforded any of the protections that are generally available at common law within

Australia or within the industrial provisions that govern employment (Burgess &

Connell, 2004).

It may also be argued that there has been a steady blurring of the definition

of the contractors over time (Department of Employment, 1996; Mitlacher, 2007)

as they can fall between the positions of being an employee and a contractor.

They can not only maintain some of the security offered by being employed, but

they can also gain the financial benefits of being independent. The engagement of

a contractor which appears to be independent but may be dependent potentially

poses a difficulty for the hosts and the agents when they have to try to avail

themselves of the level of independence of a particular contractor whom they

may wish to appoint. It has been suggested that all a contractor need do to claim

that they are a legitimate business is to provide to an agent or a host an

Australian Business Number (ABN) or a personal services business determination

(Ambiguous, 2005), to enable them to be treated as a contractor and allowed to

trade in the manner of their choosing.

A number of different definitions have become reasonably common in

various jurisdictions making it even more difficult for the agents and the hosts to

define what type of contractor they are engaging or perhaps should be employing.

In 2011 this was supported by Danesi (2011) in her paper to the International

Industrial Relations Association (IIRA) stating that “while the term non-standard

work arrangements (NSWA’s) is used globally, there is no internationally agreed

definition of NSWA’s”.

This simple misalignment of definitions of the contractors combined with the

potential to minimise costs by deliberately or innocently defining the contractors

incorrectly, may be the catalyst that is responsible for the rapid growth of the

CTR. Without a clear definition of a contractor then it becomes difficult to

determine which of the actors of the CTR is responsible for contractors


30

A selection of some of the more common definitions of contractors that are

used in various jurisdictions can be seen in Table 1.

Table 1

Commonly used definitions for contractors

Definition

iPro (Leighton & McKeown, 2015)

Micro enterprise (Fudge & Owens, 2006)

contractor employee (Benson, 1998)

peripheral workers (Alverez-Galvan, 2012; Holmes, 1986)

own account self-employed sub-contractors

(Quinlan, 2012; O’Donnell, 2004)

precarious employees (Fudge & Owens, (2006)

professional contractor workforce (McKeown, 2002)

one person micro business (Maahs, 2004)

temporary contract worker (Guest, 2004)

contingent worker (Matusik & Hill, 1998)

free boundary-less worker (Marler et al., 2002)

self-employed (Capelli, 1999)

free knowledge worker (Matusik & Hill, 1998)

high level contract worker (Smith & Nuewirth, 2008)

temporary worker (Waite & Will, 2001)

Part-timers (Kalleberg, Knoke, Marsden, & Spaeth, 2000)

dependent self-employed (Boheim & Muhlberger, 2009)

leased labour (Johnstone & Quinlan, 2005)

contract out-workers (Commonwealth of Australia, 2006)

on-hire independent contractor (Recruitment and Consulting Services Association, 2011)

not an employee (Commonwealth of Australia 2010)

highly skilled knowledge workers (Neumark & Reed, 2002)

In Australia, The Recruitment and Consulting Services Association (RCSA),

which is the peak professional body for the recruitment and the human resources

services sector in Australia and New Zealand, tend to use the definition of ‘on-

hire independent contractors, to describe the white-collar technical, professional


31

and scientific contractors (RCSA, 2011). The RCSA definition might indeed be

considered an oxymoron, as on-hire implies employment, whereas ‘independent

contractors’ suggest non-employment. The Australian government, in its

discussion paper “Sham arrangements and the use of Labour-hire in the Building

and Construction Industry” (Commonwealth of Australia, 2010) defines a

contractor as a worker who is simply ‘not an employee’ and it encompasses both

dependent and independent contractors. Interestingly, the Australian Department

of Employment and Workplace Relations (DEWR) in Australia uses three

approaches to try to clarify the difference between an employee and an

independent contractor. It uses the common law approach, the legislative

approach, and thirdly it uses the Australian Tax Office’s (ATO’s) test for the

legitimacy of businesses under its Alienation of Personal Services Income Act 2000

(PSI) rules, often referred to as the 80/20 rule.

The first of the three approaches used by DEWR to try and identify the

differences between an employee and a contractor is the common law approach

that defines employed people as those who are engaged under a contract ‘of’

service, as opposed to independent contractors who are engaged under a contract

‘for’ service (Stewart, 2005). This common law definition allows courts to use

their own judgment based upon the ‘form’ of the relationship rather than the

substance of the relationship. Unfortunately, as has been demonstrated earlier,

this can be subjective depending upon the judge determining the ruling at the

time leading to inconsistency and the rulings being unhelpful in the wider already

confused jurisdiction. Relying upon a judge to make a ruling on every case is also

inefficient and costly and can simply add to further confusion in the market-place.

The second approach used by DEWR is a legislative approach and is used to

define the contractual terms and rules of an agreement constructed between the

two parties. The legislation gives the courts more of an objective appraisal of the

relationship between the actors. Unfortunately, again there is no standard set of

rules to assist here either as contracts can be written or agreed upon as the

parties see fit.


32

DEWR’s third approach is to rely upon the ATO’s Personal Services Income

(PSI) rules which can be referred to and used by all three actors, plus the ATO

check of whether an entity can, in fact, be confirmed a legitimate business (and

not an employee) and therefore qualify for legitimate business taxation

(Australian Tax Office, 2016).

It appears counter-intuitive that different bodies label the contractors

differently, and that the courts use slightly different criteria to help them decide

the nature of an employment relationship. Consequently, it is unsurprising that a

large number of contractors (both independent and dependent) may be deemed

by the ATO to be earning a Personal Services Income (PSI) and should, therefore,

be classified as employees of the host or the agent. If a contractor is deemed to

be a ‘sham’ (Australian Government, 2009) there is the potential for heavy

penalties for all involved should either the host or the agent be classified as the

true employer. This risk has resulted in the Association of Professional Engineers,

Scientists and Managers, Australia (APESMA) in 2007 expressing concerns for their

members. According to an APESMA survey (Rickard, 2007), 12% of members were

engaged on a self-employed basis yet 37.9% of their members would have failed

the ATO’s PSI rule (Australian Tax Office, 2016) and would, if investigated, be

deemed by the ATO ‘not to be a legitimate business’ for the purpose of taxation.

Similarly, in 2010, the Construction, Forestry, Mining and Energy Union (CFMEU)

confirmed that using the ATO’s criteria that between 24% and 46% of the

independent contractors operating in the blue-collar construction industry sector

could also be deemed to be ‘sham’ contractors. Such a determination could result

in a projected loss of taxation revenue in the order of $2.47 billion per year, plus

the additional lost revenues to non-declared earnings, non-contributions of

payroll taxes, and superannuation contributions (CFMEU, 2011, p. 3.).

The preceding challenges and complexity associated with simply attempting

to define a contractor combined with a lack of understanding and clarity over the

roles and responsibilities of each actor within the CTR can lead to failures in

meeting employment, health and safety (Johnstone & Quinlan, 2006), and legal


33

responsibilities. It can also lead to dissatisfaction with the relationship,

inconsistent management expectations between and amongst the actors plus

financial risks and potentially a reduced level of satisfaction with the services

provided (American Production and Inventory Control Society, 2006).

1.5 PROBLEMS

The CTR became complicated during the 1980s and 1990s as a result of a

number of legal determinations providing confusion as to whether some

contractors were functioning as independent contractors or whether they were

deemed to be in an employment relationship. For example, the Stevens v.

Brodribb Sawmilling Company Pty Ltd (1986) case, the Building Workers'

Industrial Union of Australia v. Odco Pty Ltd case, and the Hollis v. Vabu Pty Ltd

(High Court of Australia, 2001) case.

Further legal confusion entered the market-place when some State

governments enacted their own legislation in an attempt to nullify some employer

strategies to mask what might have been true employment relationships, i.e. The

Industrial Relations Act 1996 (Qld), The Industrial Relations Act 17 of 1996 (NSW),

and The Fair Work Act 1994 (SA). All of these pieces of legislation are current and

contain deeming provisions to bring certain contractors back (in certain

circumstances) to the status of an employee, should this be needed.

Unfortunately, the challenge of the true legal status of whether contractors may

be employees in some circumstances is still continuing for example, the On Call

Interpreters and Translators v. The Commissioner of Taxation (No3) [2011] FCA

366 case and the Ace Australia v. Trifunovski (2011) case, the Contracting Pty Ltd

t/a Tricord Personnel v. CFMEU (2005) case, and the recent Fair Work

Ombudsman v Quest South Perth Holdings Pty Ltd and Ors [2015] HCA 45 case.

The mixed rulings emanating from the above cases combined with the

number of different ways a contractor may be defined (see Table 1) continues to

provide uncertainty in the market-place for different reasons. For example, an

independent contractor may fail the Australian Taxation Office’s (ATO’s)


34

Alienation of Personal Services Income Act 2000 (PSI) tests [the 80/20 rule] (see

Appendix D) and therefore be defined as an employee, but still claim at

commercial law to be operating a contract ‘for’ service as a contractor.

Some hosts may use their powers to force (push) or encourage (pull) new or

replacement workers into forming entities so that they can re-engage them on a

contractual basis to avoid their employment liabilities, as highlighted in the Fair

Work Ombudsman v Quest South Perth Holdings Pty Ltd and Ors [2015] HCA 45.

Case. In situations like this these new contractors may not have the necessary

information or resources to purchase their own private insurances or very little

bargaining power (Burke, 2013) to function as contractors in the wider market-

place, and further they may not be fully aware of all of the legislative

requirements that apply to them (ATO, 2012).

This uncertainty can also be seen in the courts and in government. A

relatively simple case of wrongful dismissal in Western Australia took three

attempts and two levels of the judiciary to resolve the simple question of whether

the contractor was an employee or not so that the fundamental topic of wrongful

dismissal could be concluded. In the December 2010 Inquiry into Sham

Arrangements and the use of Labour-hire in the Building and Construction Industry,

it called for nationwide:

“Recommendations regarding the confusion surrounding the definitions of

‘employees’ and ‘independent contractors’ at common law and in statutes”


1.6 AIM OF THE STUDY

The aim of the current study is to explore the perceptions, benefits and

challenges of the CTR. In particular, the lived experiences of each of the groups

of actors within it (i.e. contractors, agents and hosts), who operate in the white-

collar environment of the mining, construction, IT and engineering consulting

industries. Developing a deeper understanding of this complex relationship will

provide insights, greater clarity and understanding of the expectations and


35

responsibilities of each group of actors. Such understanding will provide

additional evidence to support improved management practices, reduce the level

of confusion amongst the actors, equalise potential power imbalances, and

improve the occupational health and safety for the contractors.

The mining, construction, engineering and IT sectors were selected for this

study as the recent and largest resources boom in Australia’s modern history

required many new projects and supporting infrastructure to be designed,

constructed and commissioned (Phillips, 2016). To support these complex projects,

organisations needed to engage sufficiently technically qualified personnel for the

period of the projects and therefore relied on supplementing their core staff with

contractors engaged in CTRs.

1.7 INTERACTIONS WITHIN THE CTR.

The current study also seeks to examine the nature of the CTR when all

actors are simultaneously engaged in the relationship, therefore the operational

phase of the relationship will become the major focus of the research. The

operational phase is where the contractor actually works in the host’s premises

and where all three types of actors have different and changing relationships with

each other. They also have complex relationships during the recruitment and

termination phases, however, this thesis is delimited to focus exclusively on the

operational phase of the CTR (see Figure 8).


36

Figure 8. Interaction within the tripartite relationship over time.

Once the contractor is inducted by the host, the host will generally control

and integrate the contractor within its premises in a similar manner to that of an

employer and employee relationship. It is unusual for engineering design

contractors to work remotely from the host as they are generally required to be

embedded within the host’s design teams and therefore be available to the host’s

supervisors for direction. Where the contractors are truly independent and further

along O’Donnell’s ‘employee to consultant continuum’ (see Figure 7), they may

work remotely in some circumstances. The host provides design management and

monitors the contractor’s output. At the termination phase of the contract, the

host debriefs the agency, and the contractor privately engages again with the

agent or his/her network to source their next contract.

As each contract is unique and inseparably linked with different time periods,

personalities, skill levels, and commercial pressures faced by the contractor

(Potobsky, 2007), it is difficult to generalise a typical contract for analysis

purposes. Nevertheless, contracts that are for a period of at least 12 months and

where the contractor works 38 or more hours per week for one host are likely to

be an example of where the CTR relationship is most complex. Such relationships

agent

Contractor

Contract ‘for’ service

Recruitm

ent

phase

Operational Phase Term

ina

on

phase

HOST

CONTRACTOR

AGENT

Figure8.0.Interac onwithinthetripar terela onshipover me


37

are also characterised by the contractor being engaged under a contract for

service by the agent (or his or her own entity), and where the agent is also

engaged in a contract for service with the host (see Figure 3). In the indirect

relationship, the contractor and the host do not exchange contracts. In a direct

relationship the contractor’s entity exchanges a contract with the host.

To support the adoption of a conservative 12-month contract period for

discussion and analysis purposes within this thesis an Australian Bureau of

Statistics report (2016) reveals that 24% of contractors in Australia work more

than 49 hours per week, and that 93% of independent contractors are expected to

be with their current employer/business for more than 12 months. The ABS also

highlights that 40% of the independent contractors are with their current

employer/business for 10 years or more (Australian Bureau of Statistics, 2016),

and from an international perspective the average length of contracts reported in

Europe for temporary workers was stated as more than two years (Guest, Isaksson,

& Witte, 2010).

1.8 GAPS IN THE THEORETICAL AND EMPIRICAL LITERATURE

The extant research has mainly investigated the negative effects of the ‘on-

hire’ tripartite relationship within the blue-collar roles rather than the CTR in the

white-collar sector. Significantly, most of the literature that includes white-collar

professional contractors tend to group them within the category of precarious

employment (Fudge & Owen, 2006). Accordingly, both theoretical and empirical

work is needed to examine the phenomenon of professional contractors who are

not precariously engaged, yet bound by some of the legislation that applies to the

precarious blue-collar cohort. Professional white-collar contractors are generally

paid well above the rates that are paid to their employee counterparts in the host

organisation (Cohany, 1998), and because of the shortage of technical skills in the

market they can be in strong demand affording them choice over when, where,

and for how long they wish to work. Working conditions are normally similar if not

identical to those of employees, as the contractors normally operate from city

style offices. Even when on site, professional white-collar contractors mainly


38

operate from professional design or construction offices, consequently, their

occupational health and safety statistics are likely not be as poor as the blue-

collar sector. Moreover, and as these professional contractors are generally

engaged in the professions of their choice they have generally gained reasonable

seniority in age and experience. Therefore, white-collar professional contractors

engaged in a CTR are clearly a uniquely different cohort to those blue-collar

workers engaged in on-hire precarious employment.

Regardless of the status of the contractors, they experience the dichotomy

of the basic master/servant employment-style relationship, which by definition

will produce a principal/agent relationship (as in agency theory) (Jenson,

Meckling, 1976), divergent psychological contracts (as in psychological contract

theory) (Maahs, 2004), and power imbalances (as proclaimed in the theory of

power) (Gary, 2001). All three of the above theories will, therefore, be used as

lenses through which the CTR relationship is examined and will thus become

central themes of this thesis. These theories will be discussed in detail in Chapter

Two.

1.9 METHODOLOGY OVERVIEW

To explore the lived experiences of actors within the professional CTR, a

qualitative methodology is proposed. The research is delimited to focus explicitly

upon the professional and technical white-collar CTR within Australia’s IT, mining,

construction and consulting engineering sectors. The contractors in this

relationship mainly work within the premises of the host and normally hold

tertiary level qualifications, and are engaged at the level of

Engineer/Drafter/Designer or Administrator. The current thesis will specifically

focus on contractors providing their services either via an employment agent or

directly to the host and who use an entity to trade through.

As the professional CTR is a topic that has received limited prior

investigation, the research will adopt a qualitative ethnographic philosophy to

explore the phenomena. The research will gather the perspectives of the three


39

groups of actors in the relationship from a cross-section of participants in the

Brisbane region of Queensland, Australia. The hosts will be sought from consulting

engineering or IT organisations, construction, and mining firms. The agents will be

sought from recruitment consultants and agencies that specifically operate in the

professional and technical white-collar IT, mining, engineering or construction

consulting industries. A sample of contractors will be sought from technical

specialists (tertiary qualified), i.e. design drafters, design engineers, procurement

personnel, contract administrators, IT specialists, and construction engineers,

who use their own entity to contract to agents or host organisations.

The rich and detailed qualitative data gleaned from the lived experiences of

the three cohorts of actors in the professional CTR will be analysed to generate a

comprehensive understanding of the perceptions, concerns, benefits and

challenges of this unique workforce arrangement. The outcomes of the initial

interviews will then be used to inform a qualitative survey to capture the

perspectives of a broader range of actors in order to triangulate the data from the

initial findings, and provide outcomes that may be generalised. The outcomes of

this dissertation will provide a deeper understanding and description of the

professional CTR, informing recommendations for how this sector may be able to

operate with more clarity, efficiency and effectiveness whilst improving the

management and safety outcomes for the contractors. It is further anticipated

that the research may also provide a platform from which future research may

continue to investigate the complex set of relationships that bind the professional

CTR.

1.10 SUMMARY

Much literature has been written in relation to non-standard work

arrangements in Australia and overseas with a number of authors framing the

topic with phrases and terms such as precarious work, contingent work, insecurity,

exploitation, lack of protection, degradation of wages, exclusion from benefits,

and poor working conditions (Burgess & Connell, 2004; Fudge & Owens, 2006;

Johnstone, et al. 2012; Quinlan, 2012). All of the above imply negative


40

connotations, and all are generally applicable to the on-hire blue and brown-

collar cohorts, plus some of the white-collar on-hire secretarial and

administrative disciplines. The white-collar technical contractors within this study

may also be categorised as being precarious or insecure, as they too are not

permanently employed and therefore remain at the behest of their host, who is

ultimately responsible for providing their work opportunity. However, as the

white-collar technical contractors are a niche cohort, who enjoys the benefits of

good rates and conditions (Dalby, 1995), it is suggested that they may not suffer

all of the negative features that the authors describe above and perhaps should

not be grouped within the precarious cohort.

The power relationships that underpin the dichotomy of the traditional

labour laws were originally based on the colonial master/servant relationship

(Johnstone et al., 2012). Today such power imbalance gives the business owner a

capacity to be able to influence the worker (Turner, 2005), or an agency problem

between the principal and the subordinate agents (Eisenhardt, 1989), or a

potential for breach of the psychological contract between the directors and

his/her managers (Guest, 2004).

This first chapter has provided the foundation for the current dissertation

and has demonstrated the need and justification for the research. It has

introduced the research problem and highlighted the conflict within the CTR in

terms of the contractors’ employment status and thus the potential financial and

legal liabilities and poor management practices, which in turn may lead to poor

occupational health and safety statistics, and poor management of this complex

relationship.

The overall methodology was discussed and justified i.e. an ethnographic

qualitative interview followed by a qualitative survey. The overall dissertation

was outlined, and the limitations and the delimitations of the research were

introduced. Chapter Two of this thesis has been constructed to provide an

overview of the operation of the CTR, reviewing the current literature and the


41

gap in both the literature and theory in relation to the topic. Chapter Three

describes the methodology of the research with Chapter Four reporting the

findings of the interview and survey studies on the topics of the ‘wider contextual

data’. Chapter Five demonstrates the findings and discussions from the interviews

and surveys using the theoretical lenses of agency theory (Eisenhardt, 1989),

psychological contract theory (Guest, 2004), and the theory of power (Ranjan &

Zingales, 1997). The findings are integrated and delivered as a conclusion in

Chapter Six with recommendations. Chapter Six also provides a direction for

future research and a goal to provide a theory that will accurately define the CTR.


42

CHAPTER TWO 2.0 LITERATURE REVIEW

The purpose of the current research is to explore the relationships within

the CTR in order to minimise the potential difficulties within it and therefore

provide clarity in relation to the actors’ liabilities and responsibilities.

Consequently, this chapter explores the present status of the available theories

and literature applied to the CTR, in particular using the three key theories,

agency theory (Jensen, Meckling, 1976), psychological contract theory (Maahs,

2004), and the theory of power (Gary, 2001). Other theories were contemplated

to assist with this thesis, in particular, social exchange theory (Homans, 1958) and

stakeholder theory (Azburg & Webb, 1999), however, this research was delimited

to use the previous three theories to provide a defined focus. Also, as this

research has both a social aspect (where the actors work together) and also a

legal aspect (where the liabilities of employment or engagement have to be

concluded), then this research was initially reviewed to assess the potential

outcomes of these two topics. As this research is exploratory then the potentially

restrictive boundaries of reviewing the topic exclusively under social and legal

aspects were rejected allowing the thesis to be totally exploratory.

Initially, the lens of agency theory, which provides a realistic and testable

perspective on co-operative behaviour, whilst viewing the topic through the free-

agency perspective is reviewed (Eisenhardt, 1989). The agency literature is then

followed by a review of psychological contract theory (Rousseau, 1989), which

enables a close inspection of the tangible and intangible expectations of the three

groups of actors. Finally, literature will be reviewed through the lens of the

theory of power (Rajan & Zinglaes, 1997), which will guide the review of the

power relationships within the CTR and its changes over time. As the author’s

personal epistemological paradigm is post-positivist and this has naturally

supported the choice of the above lenses through which the author has searched

for fact and scientific rigour to answer the research problem. Overall, the thesis

will focus upon the generalities of the relationship with particular emphasis on

the engagement relationship of the contractor and its anomalies.


43

The theoretical and empirical studies synthesised within this chapter will

demonstrate that there is a significant gap in the literature applicable to the

cohort of contractors and the tripartite relationship under study. Accordingly, the

chapter will also examine literature in relation to the form of the CTR within the

blue-collar industrial sector, followed by the white-collar labour-hire group, and

lastly the white–collar technical contractor cohort. The chapter will also integrate

an analysis of research findings in relation to the literature from studies with

contractors and tripartite relationships in the USA and Europe. This chapter will

sequentially draw upon studies adopting agency theory (Eisenhardt, 1989),


Zingales, 1997) together with other pertinent empirical literature to thematically

explore the roles of the three groups of actors within the CTR. Reviewing the

literature in such a way will help close the gap between practice and theory.

2.1 AGENCY THEORY

To avoid confusion regarding the word agency,

• The broker or agent within agency theory will be termed agent.

• An employment agent will be referred to as agent and will always be a

broker.

Generally, ‘agency’ supporters, futurists and staffing experts view the new

flexible contractors (including CTR contractors) as highly skilled free agents, who

are leading a push for change against the establishment in favour of a ‘skills-for-

hire’ economy (Barley & Kunda, 2006). This is diametrically opposed to the

perspective of the sociologists and economists who espouse the institutional

perspective, and who generally interpret flexibility and precarious work as a

challenge to the notion of full-time secure work with all of its social benefits

(Barley & Kunda, 2006). These simple dichotomous positions are perhaps too rigid

to describe such a vast array of situations that exists along a continuum between

the two boundary positions, as there are many white-collar contractors who may

initially be identified as ‘flexible new-age workers’ because they have


44

incorporated, but may in fact have been forced (pushed) or coerced (pulled) into

a contracting situation (Rawling, 2006). Alternatively they may be Institutionalists

who simply could not find an income stream any other way, or they may have

clashed with the tensions and politics of corporate professionalism and now prefer

to be contractors, or they may simply be ‘itinerant employees’ (Barley and Kunda,

2006) or ‘economic refugees’ (Walker, 2011), or they may have a need to balance

family and work pressures (Mckeown & Hanley, 2009). Whatever the reason a

contractor chooses to function within a CTR, and where on the continuum the

contractor sits, there should not be any confusion in relation to the contractors’

safety, nor should there be any confusion relating to their status as an employee

or a contractor, or any confusion whatsoever in relating to their management,

liabilities or financial risks, whether they are direct or indirect. Similarly the

hosts should be without confusion as to their responsibilities in relation to housing

a contractor in their premises to perform a piece of work under their direction

and control in both direct and indirect relationships, and neither should the agent

be confused in relation to the contractors’ payroll, superannuation, payroll taxes

and potential insurance requirements.

2.1.1 Agency theory in tripartite relationship

Agency theory in its modern form, which was created by Stephen Ross and

Barry Mitnick in the early 1970s (Mitnick, 2006), is a useful theory to begin trying

to unravel some of the complexities within the CTR. Agency theory is generally

used to predict the co-operative behaviour between a principal and an agent at

the organisational level of society, where the principal and the agent have

differing goals and attitudes towards corporate risk (Eisenhardt, 1989). The CTR

adds complexity and poses a particular challenge for explanation using agency

theory as the CTR potentially has multiple sets of agency, i.e. one between each

pair of actors, and potentially their reversal. However, it can also be viewed as a

closed three-link supply-chain (Fayezi, O’loughlin, & Zutshi, 2012), or even a

series of bipartite relationships where each agent has two principals (Tate, Ellram,

Bals, Hartman, & Valk, 2010) or where each principal may have two agents.


45

In 1976, Ross and Minick’s ground-breaking article proposed that their theory

of the firm confirms that agency theory can be found in many situations and at

every level of society where the principal grants authority, either contractually,

or by law, and either in a written or verbal manner, to an agent to act on its

behalf when dealing with a third party. In the CTR, agency theory can then be

said to apply to all of its combinations of principal/agent relationships between

the three groups of actors. (i.e. host, agent and contractor). For example, each

actor can potentially be a principal or an agent of the other individual actors,

depending upon the circumstances within the CTR at a particular point in time. A

contractor may posses a particularly sought after skill and demand of the agent

that his or her rates and conditions be improved, resulting in the agent acting on

his or her behalf as an agent of the contractor, who in this situation would be the

principal. Similarly, the host may take a subordinate position to the agent

assuming that the agent is the employer of the contractor and therefore the host

would allow the agent (now principal) to direct the host in relation to

employment and management issues.

Since its inception agency theory has developed along two dissimilar streams

of inquiry, i.e. principal, agent research (PAR) and positivist agency theory (PAT).

Both streams of research can partially contribute to explaining the CTR, but as

the PAT has been based upon practical real-world agency situations and

descriptive agency behaviours (Fayezi et al., 2012), it has been accepted as

playing a dominant role in supply-chain research. Consequently, the CTR will be

reviewed mainly using PAT to highlight the conflicting goals and risks of the CTR

actors.

In the CTR we can confidently state that the three-way relationship will

produce a minimum of three strands of agency and therefore three strands of

conflict; one between each set of the actors (i.e. host to agent, agent to

contractor, and host to contractor). Plus a minimum of three different sets of

agency problems, potentially resulting in three separate ‘goal objectives’. Three

tiers of different ‘risk profiles’, and perhaps three sets of ‘incomplete and/or


46

asymmetrical information’ and ‘moral hazards’ within it. Where the economic

conditions provide a strong demand for contractors, or where one agent may

control a discipline of contractors then the normal principal/agent relationship

may be reversed resulting in potentially six variations of agency, potentially six

psychological contracts, and six variations of power imbalances, plus all of the

relationships may change over time.

2.1.1.1 Organisational level

Agency theorists generally tend to commence their explanations of agency

theory by explaining the ‘agency problem’ (Eisenhardt, 1989) at the

organisational level by using the relationship between shareholders (principals)

and their directors (agents) to help make the point that the principals do not have

control over the behaviour of their agents (Bear & Means, 1932; Eisenhardt, 1989;

Jensen & Macklin, 1976). Also, as an informal fiduciary relationship generally

exists between the principal and the agent for the principal’s benefit then the

principal must trust the agent to exercise a duty of loyalty in a manner that is in

the principal’s interests. By extrapolation, there may be problems (an agency

problem) if the agent does not conform and instead acts in its own interests. For

the principal to monitor the potential aberrant activity of the agent it will be

necessary for the principal to expend bonding and/or incentive costs to try to

ensure that the agent does act correctly (Jensen & Meckling, 2000). If the

principal does not monitor the agent or provide incentives to encourage the agent

to act in the principal’s interest, then by definition, the agent may act

opportunistically, in its self-interests, and therefore potentially breach its

fiduciary agreement. Similarly, the principal and the agent may also have

different attitudes to risk and therefore differing attitudes as to how to achieve

their goals, for example by preferring outcome-based or behavioural based

contracts (Eisenhardt, 1989).

Goal conflict was found to be one of the contributing factors in the

“Deepwater Horizon” oil spill in the Gulf of Mexico in April 2010 (Neill & Morris,

2012) where the United States (U.S.) experienced one of its most catastrophic


47

man-made disasters. British Petroleum (BP) was the ‘well owner’ with Mineral

Management Petroleum (MMP) acting as an agent of the Department of the

Interior (DOI) (i.e. citizens) and at the same time, MMP was acting as a principal

in its relationship with the oil industry. Neill and Morris’s research in 2012

exposed that there was: -

“A lack of monitoring, coupled with the willingness of MMP to align its

goals with the oil industry rather than the public interest which

resulted in a lax of the regulatory environment that allowed BP to

operate largely without public oversight” (Neill & Morris, 2012, p.1).

This relationship between the actors was one of ‘multi-agency’ with multiple

levels of principal/agent relationships that eventually made effective monitoring

and therefore public accountability difficult to achieve. The Deepwater Horizon

disaster claimed the lives of eleven people and the clean-up cost to BP, which by

2012 had reached US$ 14.0 billion.

Unfortunately, where the principal cannot (or will not) consistently monitor

the agent it can lead to information asymmetry, whereby the agent may act in its

self-interests and withhold information from the principal, thus causing an

imbalance of power in favour of the agent and a potential moral hazard. Similarly,

in the CTR if an agent or contractor does not monitor the host it may also

withhold information from them, again generating an imbalance of power but this

time in favour of the host. The current literature applied to supply chains

suggests that the principal (host) should generally be in a risk-neutral position and

it should be able to use its power to design contracts that mitigate any potential

agent moral hazard as the agent should be subordinate and therefore less likely to

behave in an inappropriate manner (Fayezi et al., 2012), Unfortunately (when the

market is buoyant) the agents within the CTR experience strong demand for their

services and therefore diminish the hosts’ power over them, increasing again the

potential for the agents to act in their own interests, i.e. perhaps to withhold

information or breach a contract for extra income with an alternative host.


48

Acting with self-interest through the withholding of information appears

counter to the principle of agency theory. In a traditional agency relationship

information is forwarded from the principal to the agent to activate the agent’s

‘norms of loyalty’ and or obedience, which if accompanied by some level of

inducement from the host this will, in turn, encourage cooperation and alignment

of their goals (Delves & Patrick, 1973). However, this does not appear to be the

case in the CTR with all three actors having to expend resources to acquire

information from the other two actors. For example the host and or the

employment agent may have to perform their own reference checking to avoid

adverse contractor selection. This may be particularly evident in the recruitment

phase of the CTR where the employment agent may withhold negative

information from the host regarding the contractor that may perhaps be

detrimental to the contractor’s opportunity and the agent’s profit; or equally the

host may withhold negative information about the position and its conditions from

both the agent and the contractor in the hope that the contractor, once

appointed, will not reject the assignment upon the discovery of the real

conditions at the workplace. In this theoretical case the risk profiles of the

contractor, the agent, and the host are inflated as they all may be exposed as

being untruthful and consequently may lose (or either may decide to terminate)

their contracts.

There is a moral hazard due to information asymmetry which is particularly

relevant in the sectors where the agent has specialist knowledge upon which the

principal has to rely to make decisions, e.g. the share market or technical

expertise. Further, where the principal chooses not to expend monitoring costs to

monitor the agent or to provide adequate research of it’s own, then the principal

may suffer the consequences of the risk of information asymmetry. A case

example of such a risk was provided in the early 1990s; Dixon’s, a UK retail store

purchased Silo, an American based electrical goods retailer for US$384 million.

Five years after the purchase Dixon’s withdrew from the American market at a

cost to the company of over US$400 million citing that an information asymmetry


49

problem was underestimated (Doherty, 1999) as they failed to carry out thorough

research of the local markets, and that they had not anticipated the degree of

competitiveness or the speed of change within the market-place.

At the organisational level, the principal (host), perhaps a large consulting

engineering firm can delegate through a hierarchical chain from its principal

‘shareholders’ to the employment agent (agent) a requirement to source

numerous contractors for its next design project. The employment agent wants to

win the host’s business and is thus keen to satisfy the host’s expectations. As the

agent is generally engaged on a contingent basis, then the contract between the

host and the agent would be ‘outcome-based’ with the agent taking a risk, on the

basis that they could outperform their competition by supplying better-suited

contractors to fill the host’s available positions.

As risk is associated with negative connotations, then this means that the

agent may not win the hosts business all the time. To mitigate against this

potential loss of business the agent normally spreads it service base to a number

of similar hosts in the same market (thereby reducing its risk profile). Similarly,

the host will mitigate its risk against agency non-performance (perhaps due to

moral hazard) by also spreading its requirements to a number of similar agents

(thereby reducing its risk profile). As the host’s requirements are normally issued

to more than one agent then this may also result in fierce competition between

employment agents as they try to secure the best contractors for the host whilst

also trying to maintain the hosts’ business by projecting a strong reputation for

successful and accurate placements.

When the host issues an opportunity to a number of competitive agents to

supply contractors for his or her project, the host takes a risk that the agents will

react to the requirement as they may be busy with similar and conflicting

opportunities from the hosts’ competitors who may also have issued similar

opportunities to the same group of agents. The agents therefore compete for the

services of the scarce contractors. The host has to be cognisant of this and


50

perhaps try to either incentivise the agent, using behavioural outcomes, to work

in their interests or offer some other bonding situation; perhaps a preferred

supplier agreement, to ensure that the agent does react in the hosts’ interests,

thus attempting to align the goals of the principal and the agent in order to

reduce the risk profiles and reduce the monitoring costs of both actors. Zsidisn

and Ellram (2003) were able to show with their American quantitative research

that through the implementation of behavioural-based management effort and/or

buffer orientated methods, the host could shield their organisations from

detrimental effects where suppliers (agents) could choose to supply or not.

Unfortunately, both options can be costly and detrimental to the hosts’ business,

for example, John Deere & Company engaged 80 engineers to work solely on

supplier development efforts, to mitigate any supplier issues (Zsidisn & Ellram,

2003) as previously indicated but at a large payroll cost.

2.1.1.2 Personal Level

At the personal level, i.e. where the contractor is working within the host’s

offices then the host/contractor (principal/agent) relationship is evident again

with the host expecting the contractor to perform as directed for remuneration.

Also, as the contractors work for hourly rates then the contract is behaviourally

based with the host managing the contractor in a similar manner to that of an

employee for the length of the contract. The contractor would not normally be

engaged to provide a result, nor would they have to rectify errors that they make

as the host generally controls their technical output and therefore accepts

vicarious liability for the contractor’s work. In a true master/servant relationship

‘Respondeat superior’ applies where the master (host) accepts liability for the

acts of its servant (agent) (Adam, 2010), which, if applied to the host/contractor

relationship this implies that the contractors are not truly independent.

Independent contractors should be responsible for managing their own risk

including the rectification of their own errors.

As contractors are generally keen to stay enmeshed within their network of

informants (including their agent) in order to keep abreast of future contractual


51

opportunities this also maintains the risk profile for the hosts and the agents.

Should a more prestigious project become available to the contractor then the

contractor may act in its self-interest and break his/her present contract for

extra benefits (which might include a better rate, or a longer contract, or more

hours to be worked per week) with the new host. The original host and the

original agent must be aware of this and try to mitigate their losses by

incentivising the contractor with better benefits in an attempt to try to encourage

the contractors to stay. It may well be that the agent in this scenario will also act

for the same contractor for the next project, resulting in the agent’s and the

host’s goals being misaligned and therefore increasing both of their risk profiles.

The host may also suffer from asymmetrical or lack of information by not being

made aware of the self-interested actions of the agent or the contractor until the

contractor resigns. There is also a risk to the contractor’s reputation if they

persist with this self-serving behaviour, as the contractor not only breaks their

duty of loyalty to the host and to the agent but they would also violate their

contract for service with either the host or the agent, which may jeopardise

future offers, especially when the market softens and the host or the agent have

a choice of supply of contractors. Additionally, should a contractor behave this

way then both the host and the agent will have to expend ‘agency costs’ to

secure a replacement which may also jeopardise the future relationship between

the host and the agent due to the “spillover” effect.

As agency theory suggests (Jensen & Mackling, 2000) there will always be

conflicts of interest within any principal/agent relationship. A clear example of

this was highlighted by Masulis and Reza in their 2015 study of corporate

philanthropy where they concluded that Chief Executive Officer’s (CEO’s)

(principals) actually gain enhanced reputation and social networks from corporate

giving, but due to the sometimes large transfers, the action can impinge upon and

reduce the cash-flow rights of the shareholders (agent) (Masulis & Reza, 2015).

Agency theory is efficient at predicting the bipartite relationship. However, once

the third actor is added into the relationship, especially in a closed loop situation


52

rather than a supply chain situation, then the boundaries of the principal/agent

relationship within the CTR become blurred and agency theory may fall short of

encapsulating all of the multiple dimensions of the CTR relationship.

The results of exploring the impact of agency theory, psychological contract

theory and the theory of power within the CTR are discussed in Chapters 5 and 6.

2.2 PSYCHOLOGICAL CONTRACT THEORY

In Robert Service’s (1907) poem The Cremation of Sam McGee, he portrays

psychological contract theory in just one line ‘a promise made is a debt unpaid’.

As with agency theory, psychological contract theory is normally applied to a

bipartite relationship, i.e. where one party makes a promise to another party and

the promisor expects a return. Consequently, it becomes complicated to try to

apply it over an entire three-way or multi-agency relationship, where the

promisee is encumbered by a third party which may be external to the promise

but intertwined with the two parties of the promise with its own psychological

contracts.

Psychological contract theory provides the psychological or intangible

reasons that motivate the actors to perform their work in the manner they do and

what the actors psychologically expect from each other in return (Levinson, Mandl,

Munden, Price, & Solley 1962). It also refers to the mutual intangible expectations

of inputs, outcomes and concerns, in relation to the normal employment

relationship between an employer and an employee (Chambel & Fontinha 2009;

Chapman, 2010).

As the three actors within the CTR may have high or low levels of obligations

or expectations of the other two actors, then their mutual obligations only align

twice, i.e. when all three actors have low obligations (quasi-spot) and again when

they all have high obligations. Interestingly, the three low (quasi-spot) obligations

would be more representative of a contractual relationship where the contractors

would ‘just to do a job’, and the agents and hosts would have little obligations to


53

the contractors or the agents (Losey, Meisinger, & Ulrich, 2005). The other six

combinations of mixed high and low obligations, (two high and one low; or two

low and one high), can impinge upon the misaligned actor (Marjon Van De Ven,

2012), resulting in poor performances.

Table 2

Table of mutual obligations in a CTR

Contractor Host Agent

1 Low Low Low

2 Low Low High

3 Low High High

4 Low High Low

5 High Low High

6 High Low Low

7 High High Low

8 High High High

This is particularly relevant where there may be a contract breach between

two of the actors, which may have negative consequences for the third actor

(Lapalme, Simard, & Tremblay, 2011. Or it may be relevant where one of the

three actors become neutral in the relationship resulting in the tripartite

relationship becoming a pseudo bipartite relationship. This can have significant

consequences for the actors as the research on the bipartite relationship as shown

by Rousseau and Parks (1993) indicated that there was a difference in

performance of the employees when they compared the performance of the

mutual ‘highs’ to the mutual ‘lows’. Consequently, the actors must be cognisant

of the dynamics of the CTR so that the misaligned actor can perform efficiently;

especially where this is the contractor as the performance of the CTR is based

upon the performance of the contractors.

It is important for this thesis to review the psychological contract theory in

relation to a CTR and to try to understand the nature of the multiple relationships

between the actors and the psychological pressures that they experience, as

these pressures can vary greatly. The Venn diagram (see Figure 9) shows that in a

bipartite employment relationship there are two psychological contract pressures,


54

one between the employer and employee plus one between the actors and the

market- place. When a third actor is introduced as indicated in the lower part of

the Venn diagram, this shows the complex nature of the CTR with three

psychological contracts, each with three pressures, i.e. one from each of the

other two actors plus one from the market-place. These external market

pressures and internal relationship pressures, i.e. economic conditions, deadlines,

contract length, contractor skills, external mobility of the contractor,

personalities, volition, illness, work-life balance, fluctuating demand for projects

to be completed, fluctuating availability of skilled contractors, all can have a

strong influence upon the attitudes and behaviour of the actors within the CTR.

Tecco’s (2012) organisational research study emphasised this showing that the

workers’ perceptions of environmental features impact on the attitudes and

behaviour of the workers. Further, the contractors’ behaviours, attitudes, and

therefore psychological contracts, can also be moderated as a result of their

external mobility, i.e. whether they have the choice to operate in a contingent

manner or not. For example in the USA where downsizing pressures have removed

many permanent positions, the choice to work in a contingent manner for many

workers has been involuntary (Kalleberg, et al., 1996), resulting in the

contractors having little bargaining power. The opposite is also true, as was

highlighted in Singapore in 1998 by Dyne and Ang who compared commitment,

psychological contracts, and organisational citizenship of service workers in the

nursing and banking sectors. (Dyne & Ang, 1998), demonstrated that as Singapore

has a very low unemployment rate it has encouraged workers to voluntarily

operate in a contingent manner which then enabled them to display levels of job

satisfaction equal to those of their permanent employee counterparts. They also

reported that contingent workers’ psychological contracts were stronger than the

regular employees providing more organisational citizenship behaviour (Dyke &

Soon, 1998).


55

Figure 9. Psychological contract pressures.

Also, below the surface of the definition of psychological contract theory

lays complexity, as it can be divided into three main types of psychological

contract, transactional, relational, and ideological. A transactional psychological

contract is reasonably explicit in its performance terms and monetary exchange

without an ongoing expectation of dependence. While in the relational

psychological contract, where the exchange is ‘socio-emotional’, withdrawal is

difficult, as the relationship builds and evolves over time (O’Donohue & Nelson,

2009). Finally, the ideological psychological contract applies where the actors

behave in relation to their improved perceptions of themselves as they perform in

a position that supports their ideology. As many of the CTR contractors have

become specialists in their fields, they can experience strong demand for their

services from a number of competitive hosts and agents, consequently their

psychological contracts tend to be predominantly more transactional and

ideological than relational (Chambel & Fontinha, 2009). For example, as they are

well sought after, they tend to earn good rates with long hours, and can be

associated with prestigious projects.

Viewing psychological contract theory from a multi-agency perspective, i.e.

to include all of the actors within the CTR at one time, might be described as the

Bipar tepsychologicalcontract

Host

Worker

Agent

Market

pc

Host

Psychologicalcontract mes3plusthemarket

Tripar tepsychologicalcontract.

Contractor

Market

Psychologicalcontract mes2plusthemarket

Figure 9.0.


56

balancing of the mutual intangible expectations of inputs, outcomes, and

concerns that exist within a group of actors in relation to a number of indicators,

including, job attitudes, job performance, organisational commitment, perceived

fulfilment, trust and employability (Rousseau, 1989). Unfortunately, there is little

research on the topic of psychological contracts from a multi-agency perspective.

Research to-date has been based upon workers who were long term casual

employees of the agent and as such were given the normal employee-like

inductions, training, career development, performance assessments and on-going

management by the agency, resulting in these workers having strong psychological

socio-emotional contracts with the agency at the outset (Chambel & Fontinha,

2009; Millward & Hopkins, 1998). Further, the research that is available has been

based upon the non-technical and service orientated sectors, both of which are

different cohorts to the CTR, which mainly operate in the white-collar technical

(and more recently brown-collar) sector of Australia’s industries. The current

study will attempt to highlight the multiple psychological pressures that do exist

within the CTR.

It is therefore suggested that the white-collar technical contractors’

psychological contracts with the agents are more transactional than relational.

Once the contractors are engaged and placed in the hosts’ premises, then the

contractors only require the agent to perform their payroll efficiently and

eventually to offer them their next contract. It is also suggested that the

contractors’ psychological contracts with the hosts are also more transactional

than relational, as modern contractors have strong external mobility and a

reasonably secure future and are therefore, less reliant upon the host or agent for

their future work patterns when compared to permanent employees. However,

where the contractors are engaged for long periods with one host (or in a direct

manner) then it is also suggested that their psychological contracts tend to be

more relational as they become more involved with the host and the hosts’

outcomes (goals).


57

Figure 10. Temporal development of psychological contract.

The different stages of the psychological contract for an employee or a

labour-hire agency employee can be seen above the line in Figure 10, overlaid

above the stages of operation of the CTR as in Figure 8. In a labour-hire situation

during the recruitment phase the promissory pre-employment exchanges would

create the basis of the psychological contract, after which the worker will

generally pass through an ‘early adjustment’ or ‘socialisation phase’ to the ‘latter

socialisation stage’. This may take a number of months after which the worker

will normally be in a position to confront the realities of the their hosts’

organisation and will tend to display more stabilised behaviour until the period of

engagement naturally decays and eventually terminates (Windle & Treuer, 2014).

The psychological contract formation for the contractors in a CTR may be similar

but perhaps shallower. The main difference would be experienced where the

contractors are only engaged in the hosts’ premises on short-term contracts and

agent

Promissory exchanges

Socialisation

Psych contract formation

Contract ‘for’ service

Recruitmentphase Operational phase Termina onphase

HOST

CONTRACTOR

AGENT

Early S

ocia

lisation

Later Socialisation

Anticipatory Stage

Adjustment Stage Termination StageSocialised Stage

Psychological contract decay

phase

Figure 10.0. Temporal development of psychological contract


58

would therefore not have enough time to be able to stabilise their relationships

with the host.

This short-term effect was shown to be the case in the 1998 research by

Millward and Hopkins in the United Kingdom where 476 employees (46.4% male,

53.6% female) were surveyed. The sample ranged from professionally qualified

managers to skilled manual workers in the private-sector multi-national service

industries. The survey asked them how they felt about their jobs and the

organisation they worked for in relation to outsourcing. The data confirmed that

the shorter term on-hire temporary employed workers relied less on their

psychological contracts than their employee counterparts would, stating that the

short-term temporary workers were more likely to perceive their engagement as

more transactional than relational (Millward & Hopkins, 1998).

This is also consistent with the research by Coyle-Shapiro & Kessler (2000),

who performed a longitudinal survey on over 7000 managers and representative of

a local authority in Britain. The results highlighted the importance of the

employer’s contract behaviour regarding the fulfilment of specific obligations that

affect employees’ attitudes and behaviours. It also suggested that the

psychological contracts for contingent employees are narrower in scope and have

a greater economic focus than the psychological contracts for permanent

employees. It is suggested therefore, that in a CTR where the actors are only

engaged on short-term contracts then the contractors’ psychological contracts are

more likely to be more transactional than relational as they are only engaged to

provide an outcome, after which they simply terminate their engagement, i.e.

their project is completed. This may not be the case with long-term contracts, as

at some point in time during the socialisation phase, their psychological contracts

with the host would (if they chose to fully commit to the host) resemble the

psychological contracts of permanent employees, resulting in both stronger

intangible and tangible bonds between the contractors and the hosts as time

passes (Svensson & Wolven, 2010). Unfortunately, this may be at the expense of

the intangible and tangible bonds with the agent who may slide into the


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background. It is here where the confusion may stem, as the contractor can

resemble an employee of the host, thus potentially confusing all of the actors’

original psychological contracts.

Contract breach is an interesting and important feature of the CTR multi-

agency relationship with its series of three bipartite relationships. Should one

bipartite psychological contact be breached for some reason (from either

direction) then either, both, or all three actors may have to reassess their

commitment to the relationships, or one or more actors may have to intervene to

try to rectify the breach. For example, the host may make promises to a

contractor at the interview stage, but once engaged the host may renege and

simply expect the contractor to continue to perform its services. The host may

simply not want to be regarded as the true employer of the contractor, or be seen

to fulfil employee like promises. In this situation the host may try to stay remote

and not follow through on its promise to the contractor, resulting in the

psychological contract with the contractor being breached. Alternatively, a

contractor may misinterpret a promise from the host, which from the contractors’

perspective can also be interpreted as a breach. The agent in this scenario might

want to intervene to try to resolve the breach to maintain all three relationships

in order to secure its own reputation with the other two actors and therefore

protect its business income. If the agent in this case did not intervene to support

the contractor (assuming that the agent was informed of the original host

promise) then the spillover effect, which suggests that experiences in one domain

spills over and affect the outcomes in another (Dawson, Karahanna, & Buchholz,

2013), would occur resulting in the contractor also losing faith in the agent as an

indirect result of the actions of the host.

Complicating these scenarios is the psychological contract between the host

and the agent and similarly between the agent and the contractor. For example,

in the unlikely event that the host requests that the contractors act in a manner

that was solely in the host’s interests, i.e., to try to align their goals (as in agency

theory) at the expense of the agents’ interests, then the contractor will find him


60

or herself in a difficult situation having to decide which one of its psychological

contracts to breach, i.e. the one with the host or the one with the agent. This

also indicates that control by one actor can cause confusion and disloyalty in the

other two actors. Interestingly, should a highly sought after contractor continue

to breach the psychological contract of one or both of the other two actors, might

intervene to recover the situation in order not to lose the contractor’s rare skills.

Again, should the contractor continue to breach one of the psychological

contracts then spillover would occur resulting in the remaining two actors losing

faith with each other, a scenario that the agent would not want to prosecute as

the host’s business would be too important for the agent to lose and therefore

they are unlikely to intervene. The agent in this situation is unlikely to “punish”

the host for misdeeds (Dawson et al., 2013) as the agent needs the host for future

business and therefore may sacrifice the relationship with the contractor by not

intervening.

Another example might be where the host and agent may have worked

together over many years, resulting in them both intimately understanding each

other’s idiosyncrasies, then this may result in the host/agent psychological

contract being dominant at the expense of their psychological contracts with the

contractor. The contractor may interpret this as being neglected or a breach of

his/her own psychological contract, resulting again in the contractor experiencing

a disincentive and therefore potentially providing poor performance. In this

scenario it is suggested that a possible intervention by the agent to rectify the

situation, potentially at the expense of its psychological contract with the host,

might not be as forthcoming as maybe required, as this may also lead to a loss of

business for the agent. However, should the agent intervene and take a risk in

relation to damaging its relationship with the host then spillover may be

mitigated.

Psychological contract breach in a multi-agency relationship was researched

by (Dawson et al., 2013), who explored whether the breach outcomes extend

beyond the breaching firm’s boundaries and whether the non-breached actor


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would have an obligation to intervene to rectify the breach between the other

two actors, especially where the actors had a full and agreeable understanding of

the requirements of the relationship. They were able to survey 231 IT consultants

in the USA (84% male; 16% female). The results confirmed that ‘spillover’ breach

outcomes do extend beyond the actor responsible for the original breach, with

intervention more likely to be performed by the hosts as they have deadlines to

meet and a need to keep the relationships and skills under control. Consequently,

it could be argued that psychological contract breach impacts the organisational

citizen behaviour (OCB) of the non-breached actor in both the labour-hire and the

CTR multi-agency relationships.

Additionally, Chambel and Castanheira (2006) research examined the

contributions of the organisational behaviours of the temporary workers in two

organisations in Portugal (i.e. an electronics company and a telecommunications

company). They concluded that the decision to hire contingent workers would not

have negative effects on the host organisation, providing the workers developed a

socio-emotional psychological contract. These conclusions are relevant to the CTR

as it could be argued that the highly skilled contractors are generally transaction

driven and will only generate socio-emotional psychological contracts if they are

longer-term contractors and if they are settled into a host organisation where the

host was likely to support the contractor and not breach the their psychological

contract.

Such an attitude was highlighted in the quantitative study conducted by

Buch, Kuvaas, and Dysvik (2010) in Norway, where three temporary employment

agencies issued a web-based survey to a total of 7551 contract workers in the IT,

office administration, finance, and sales disciplines. A response rate of 26.8%

resulted in a sample size of 2021 of which 35% were tertiary qualified. The

findings confirmed that if the contractor perceived support from both the agent

and the host, then the contractor would reciprocate with increased support for

both the host and the agent, plus they would demonstrate improved

organisational citizenship behaviour at the host’s premises. This study also


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confirmed the contra to be true, stating that where the contractor did not

perceive support from the agent, then the contractor was less inclined to support

the host and would therefore perceive their psychological contract to be more

transactional (Buch et al., 2010).

These findings were supported by Morf, Arnold and Staffelbach (2013), in

their quantitative study in Switzerland, where they collected data from 352

temporary agency workers to investigate how their job attitudes were influenced

by the fulfilment of their psychological contracts. The research concluded that

the temporary workers’ attitudes related positively to the fulfilment of their

psychological contract by both the host and the agent, and that the fulfilment of

the psychological contract by either the host or the agent had a moderating

affect upon the other actor, suggesting that if the contractor was performing well

for the host then this would improve the relationship between the host and the

agent (Morf et al., 2013).

The lack of research in relation to CTR and the on-hire relationship’s

psychological contracts raises an important validity issue as it can be suggested

that the research that is available is not broad enough to be able to paint an

adequate picture to describe the nuances of the full interactions in relation to

psychological contracts within the CTR. Further, the research to date appears not

to differentiate between agency workers who were functioning as those workers

who preferred the flexibility of being an agency worker or if they were agency

workers because they could not find alternative work, regardless of how their

particular market operated. It was commented by Buch et al., (2010) that the

present research can be criticised for ‘not defining the actual parties’ who

perform the psychological contract. For example, in the host’s business the

psychological contract may be formed between the supervisor and the contractor

rather than the host’s manager and the contractor. It was also commented by

Buch et al. (2010) that this type of measurement error might affect

generalisability and the outcomes of the research. Further, the present

psychological contract theory also only fits the CTR in a limited manner as it does


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not account for moderating or mediating variables such as control or for example

altruism where the contractor can put pride of his or her profession above its

psychological expectations and may indeed continue to function professionally

even when either the host or the agent have breached their psychological

contracts with the contractor.

In another study by Lee and Faller (2005) it was shown how temporary

agency workers (TAW’s) could modify their psychological contracts, as a result of

time spent in the client organisation, from a generally transactional orientation to

a more relational basis. Rousseau (1989) suggests that in the context of long-term

employment, subjective psychological contracts can, depending upon the patterns

of obligations arising between the parties, become implied contracts and part of

the social structure of which the relationship is a part, and may be used as indicia

by courts as a determination as to whether the contractor could be deemed an

employee. It was also shown in Millward and Brewerton (1999), and in Lee and

Faller (2005), that the TAWs psychological contracts develop from a generally

transactional orientation to become more relational with increased time spent in

the host’s organisation. Suggesting that the more settled the contractor becomes

then he or she may not be ‘just in it for the money’ and they may start to

generate more empathy for the hosts business. Even so, it was also shown that

the TAWs did have more transactional contracts than was witnessed with regular

staff (Millward & Brewerton, 1999), which is what one would expect, as staff

members are more likely to place a larger emphasis upon their relational

psychological contracts.

The literature that is available commenting upon the psychological contract

theory has found more interest in its breach rather than on its fulfilment (Lopes &

Chambel, 2012), with most of the literature focusing upon the on-hire tripartite

labour-hire workers rather than contractors, rendering the above research

examples indicators only of the potential outcomes of how multi-agency

psychological contracts may operate. As Windel and Treuer (2014) comment,

psychological contract theory can be criticised for being incompletely understood.


64

Svensson and Wolven (2010) added, it can be criticised for ‘not defining the

actual parties’ who perform the psychological contracts, then there is much

research on psychological contract theory in relation to both the labour-hire and

the CTR left to be performed. Interestingly, the present literature calls for

further research into psychological contract theory for temporary agency workers,

requesting a focus upon their relationships with their co-workers and staff

counterparts (Buch et al., 2010; Guest, 2004; Morf et al., 2013; Svensson &

Wolven, 2010). The results of the current review also indicate that future

research into psychological contract theory should include research into the

engagement of independent and dependent contractors in the white-collar

technical and IT sectors, with a multiple focus to encapsulate the CTR. Research

is needed to explore spillover and breach issues, plus the moderating or mediating

effects of control that might lead to multi-agency relationship confusion.

Additional research will also enable the actors of the CTR to understand their

roles more fully, eliminate any financial risk associated with the CTR and

eliminate any wrongful influences from any of the actors who try to control the

CTR relationship through the use of power.

2.3 THEORY OF POWER

The theory of power, as explained by Turner in 2005, suggests that ‘power is

the capacity for influence’ and further that ‘influence is based upon the control

of resources that are valued and desired by others’ (Turner, 2005, p. 2).

In a tripartite relationship, the host is traditionally the dominant seat of

power, as without the host there is no business for the agent, or work for the

contractor. As the hosts in this study are mainly large consulting firms they could

potentially have less empathy for individuals and more power to stimulate

compliant behaviour due to their size and market importance (Cilberti,

Pontrandolfo, & Scozzi, 2008; Galanski, Magee, Ines, & Gruenfeld 2006). The

hosts could therefore naturally express their legitimate power over the agent and

the contractor, i.e. the power that emanates from the host’s psychological values,

thus enabling the host the right to influence and control the agent and the


65

contractor (Asherman & Asherman, 2001). However, the agents also hold

legitimate power over the contractors, as the contractors are generally

dependent upon the agent for finding them work. Contractors do sometimes use

their own networks to do locate work. However, until the contractor builds a

strong enough relationship with a group of hosts, or within its own network to

diminish their reliance and obligations toward the agent, the agent maintains

power. As seen in agency theory, the host will also try to reduce its risk profile by

monitoring the contractor and the agent more closely or by expending monitoring

cost. However, the host must also try to reduce its risk profile against the

possibility that the agents may not want to support them or the contractors may

prefer an alternative host who may be offering better conditions. Consequently,

the power in the CTR may not always reside with the hosts, forcing them to

reduce their risk profile by offering preferred supplier contracts to the agents,

and more attractive and competitive conditions to the contractors.

The theory of power in a two-way relationship tries to balance the power

and dissonance within the relationship. However, adding a third party into the

relationship makes the balancing of power between three actors difficult or at

worst inoperable without one of the actors assuming a neutral position as

highlighted in the recruitment or termination phases of the CTR (see Figure 8).

At the organisation level, the power as described above, clearly resides with

the host. However, once the agent is engaged to source contractors then power is

temporarily transferred from the host to the agent; in other words, a

principal/agent relationship is created giving the agent authority to engage a

contractor once the host has made the final selection of the contractor. This is

unlike the labour-hire system where the agent makes the decisions regarding

which worker is employed and sent to work for a particular host. Once the

contractor is engaged in the CTR then the host will reassume the position of

power over both the agent and the contractor, thus reducing the agents’ and the

contractors’ power and therefore, the risk profile of the host (as in agency

theory).


66

When there is strong demand for the rare professional and technical skills in

the mining and engineering, or the IT construction or consulting sectors (as has

been experienced since the 1980s), then the contractor’s own expert power will

allow them a substantial contribution to the negotiations regarding rates and

conditions of their contracts, subject to the balancing of the agents’ power. The

agents should be cognisant of the contractors’ expert power and be able to

contribute in setting the market rates for a particular skill. Thus, a contractor will

maintain this expert power in the relationship until the host no longer requires

her/his skills or until the contract terminates. At the latter end of a contract the

contractor may break the contract (and breach the psychological contracts as

discussed earlier) to secure an alternative contract with a new host, and return to

another position of expert power with another host, with little concern for the

spillover effect on their agent or the original host.

Tompkins and Cheney (1985) explain that control and power are closely

related and both can work together. Consequently control, which can be said to

be the act of achieving a goal, and power, which is the ability to achieve a goal

even against resistance of others, can both be potentially viewed as moderating

variables on the contractor’s performance, commitment, or organisational citizen

behaviour (OCB). However, both control and power may stimulate confusion in

relation to the contractor’s true engagement status, and therefore to which of

the other two actors the contractor should report. This is especially problematic

as both the agent or the host may try to exercise their control or power over the

contractor at the same time as they each have a principal/agent relationship and

both may try to minimise their risk profiles by controlling or monitoring the

contractors, as in agency theory.

Tompkins and Cheney (1985) further show through their work in relation to

concertive control that this can thwart the hierarchical control mechanisms, thus

allowing individuals to create their own norms by which they control the work

process. Such a notion is particularly relevant to this thesis, as this concertive

control can apply to highly skilled contractors who are not subject to the normal


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employee/employer, superior/subordinate, principal/agent hierarchical type

control processes. Therefore, in some circumstances they may have a disconnect

with the other two actors within the CTR relying upon their transactional

relationships with both of them and therefore, not allowing the internal or

external pressures of the relationship to affect their overall performance or their

commitment.

Havard, Rorive and Sobiczak’s (2009) approached the tripartite relationship

from the position of the relationships between the actors rather than upon the

status of actors, showing that the relationship between the employer (agent) to

employee (contractor) being an employment relationship, the relationship

between the employer (agent) and the client (host) being a business relationship,

and the relationship between the client (host) and the employee (contractor)

being a service relationship. Even though the CTR in this thesis is clearly different

to Havard, et al., (2009) study of the labour-hire tripartite relationship, the

findings are indicative and useful for this research into the CTR. The results

revealed that the power relationships are modified depending upon the nature

and the involvement of the client (host) and/or the agent, which in turn can

displace or dilute the power and hence subordinations. The power, control and

therefore subordinate relationships within the CTR then may also vary depending

upon the relative involvement of the three actors within it. For example a host

may engage contractors to work in a remote site location where they have little

involvement with the contractors, or they could engage the contractors within

their offices where they have day-to-day dealings with them.

It is suggested that one of the reasons why the theory of power does not

fully explain the tripartite relationship is because of the fluctuating power and

control between the three actors. In practice at the organisational level the host

has a level of power, hence control over the employment agent that reduces the

need for the host to trust the agent and expend the associated transactional costs

to monitor the agent. This power can be seen to be bypassing a source of restraint

allowing the host to procure critical resources (contractors) from their external


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environment either directly or from numerous employment agents as they see fit

(Casciaro & Piskorski, 2005). If one agent does not perform for the host then the

host can simply take its business elsewhere and not maintain the relationship with

the first agent resulting not only in that agent losing the hosts future business,

but by loss of reputation in the market-place then perhaps that agent may suffer

a further loss of business from other network connected hosts. The downside of

the host changing suppliers does however incur a hidden cost, as the host will

have to invest in the time to initiate the new agent. Once a number of agents

have been initiated this way then the host will have control of the agency market

and therefore maintain its power.

Where the hosts dominate the market-place like this it is suggested that the

hosts can use their power over the agents by issuing strongly worded protective

clauses within their contracts. If the agents want to accept the hosts business

then they would be expected to agree to the hosts terms even when some could

include hold-harmless clauses or clauses that would normally be unacceptable to

the agent. For example, a host may expect the agent to sign a contractual clause

which states that the agent is the employer of a contractor, i.e. to avoid the host

‘looking like the employer’, when the contractor may in fact be an incorporated

entity i.e. propriety limited company, partnership, or a trust and therefore

clearly not an employee of the agent at all. The agents must be particularly

careful signing contracts that indemnify the hosts from actions of the contractors,

as there may only be a very little financial margin in the business relationship to

justify agents taking such an open-ended risk. But if the agents do not succumb to

the host’s requirements then the agents will have no business. In many cases the

agents may try to off-load some of the difficult clauses to their contractor, but

they are faced with a similar dilemma, as the agents must try to maintain a

positive relationship with their contractors who will normally reject accepting any

liability. Mock, Savage and Simkins (2010) researched the ethical implications that

indemnity clauses in academia have upon unions, publishers and authors. Their

conclusion showed that the most disadvantaged group by the clauses were the


69

authors and the unions, but the most advantaged were the publishers, as it may

be argued that the publishers used their power to expect that the difficult clauses

be signed, implying that the hosts in the CTR will be most advantaged actor as a

result of the agents signing the difficult and sometime unacceptable contractual

terms of their contracts.

In the relationship between the agent and the contractor, at the personal

level, power and control is also affected in both directions as both parties have a

level of dependence upon each other within the relationship (Casciaro & Piskorski,

2005). The agent has selection control over the contractor and because the agent

manages the contractor’s remuneration, then the potential withholding of funds

can also be seen to be a power and control mechanism. The contractor however,

has a measure of power and control over the agent as the contractor may have a

specialised and rare skill that could be difficult to find and one that the agent

does not want to lose. Simply, the contractor could take his or her specialisation

to a competitive agent, who could sell this same contractor to the very same host.

Consequently, the contractor could use this level of power to control the

negotiations with the agent including rate negotiations.

The relationship of real interest though is at the personal level between the

host’s supervisors and the contractor, where control is exercised again in both

directions with the host holding an executive power over the contractor (as

without the host there would not be a position available). As the host has to

deliver its product to its client on time, then the host ultimately controls the

output of the contractor, but only to a point, as the contractor may possess a

specialised skill that the host requires in order to complete the project, thus

allowing the contractor a level of power over the host.

By contrast, the direct relationship is simpler as there is no agent to

complicate the situation, resulting in the direct contractor becoming the agent of

the principal host. In this direct CTR and where the direct contractors are

engaged for long periods of time under the direction and control of the host, then


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as above they may be deemed to be pseudo employees of the host. As the

relationship of the contractor with the host can more closely resemble that of an

employee/employer, when all the indicia are taken into account. The implications

of the power relationships within the CTR are difficult define as they are

intertwined with economics of supply and demand of the contractors, the

personalities and skill levels of the contractors, the level of dependence that the

host may have on a particular contractor, and how much independence a

particular contractor is given. Adding the agent power into the relationship brings

further complications, as the agent will exert some power over the contractor,

which could interfere with the power balance between the contractor and the

host. Unfortunately, there is little research to date on the effect of power or

control in the CTR and according to Ranjan and Zingales (1997) the role of power

in organisations is poorly understood.

2.3.1 Overview of the gap in the theories

Using agency theory (Eisenhardt, 1989), psychological contract theory (Guest,

2004), and the theory of power (Ranjan & Zingales, 1997) as lenses through which

to inspect the CTR have shown some fine detail that resemble a normative

employer/employee relationship. The analysis also highlights that the CTR is a

unique relationship, which requires more research to enable better understanding

and/or prediction of the behaviour of all actors. Not only are there many

complexities within the CTR, there are also many external pressures upon it as it

is constrained by business demands, ethics, motivation, commitment, security,

tenure, performance contracts (outcome and behavioural), and the relative

involvement of one or more of the actors and their personalities.

2.4 GAP IN THE LITERATURE

In relation to the above complexities, this literature review now focuses,

compares, and comments upon the literature that applies to the three main

categories of tripartite workers. Labour-hire blue-collar workers; labour-hire

white-collar administrative workers and white-collar technical contractors.


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2.4.1 Blue-collar sector – general

Overall the literature that is available in relation to the blue-collar labour-

hire tripartite relationship is voluminous. It appears to have matured from

discussing the outcomes of the legal cases that were topical in the 1990s i.e. the

Odco case and the Stevens and Brodribb case, to focusing upon research that has

been directed at finding answers to this sectors list of negative consequences in

the workplace, i.e. insecurity (McNamara, 2006), reduced earnings and non-

existent job security (ACTU, 2011), lack of paid leave (Rawling, 2006), reduced

access to skill and career development (ACTU, 2011), poor OHS and return to

work statistics (Johnstone & Quinlan, 2006; Lippel, 2006; Quinlan & Bohle, 2008),

inferior working conditions (Australian Council of Trade Unions, 2000), plus

discrimination and exploitation. Quinlan & Bohle (2008), Davidov (2004) and

Gunasekara (2011) define the blue-collar low-skilled sector as being high risk,

with workers who earn low pay and who are collateral consequences of a

capitalist project. This may be somewhat of an overstatement as Gunasekara

focused his research upon independent contractor cleaners, construction workers,

beauticians, call centre workers, and drivers who could be said to experience the

worst of the conditions of this sector. Even so, the point is made that the labour-

hire tripartite relationship at the lower end of this blue-collar sector may not

provide the best of opportunities or conditions for its employees.

The blue-collar sector also displays a number of government inquiries, i.e.

Making it Work: Inquiry into Independent contracting and labour-hire

arrangements (Barresi, 2004) and union inquiries, for example Independent

Inquiry into Insecure Work, (Australian Council of Trade Unions, 2012) plus

submissions and speeches in response to those inquiries for example, The

Australian Building and Construction Commissioner’s speech to the 19th Annual

Labour Law conference in relation to the ‘sham’ arrangements (Johns, 2011). The

literature provides some interesting and strong opinions on the industrial blue-

collar labour-hire topic, albeit opinions that possibly reflect the political

perspectives or self-interests of the authors at that time, for example, in


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response to the “Making it Work” inquiry by the Australian Council of Trade

Unions (ACTU), the ACTU submitted a selection of case studies and interviews

which were focused upon ‘insecure workers’ to deliberately support their

arguments. For a full chronological list of inquiries and investigations (see

Appendix E).

2.4.2 White-collar lower-status labour-hire – general

Interestingly, the literature commenting upon the application of the smaller

labour-hire, white-collar tripartite relationship within the nursing, secretarial and

administration sectors, where many workers are engaged as casual employees of

their employment agent, also portrays a negative scenario with these white-collar

labour-hire employees suffering sometimes similar disadvantages to those in the

blue-collar industrial labour-hire sector. The literature in this sector provides an

international plus a descriptive perspective based upon interactive topics within

the relationship such as, motivation and management (Kosnik, 1992), power (Choi,

Leiter, & Tomaskovic-Devey, 2008), control (Vettori, 2007), liability (Wall, n.d.)

and confusion (Wears & Fisher, 2012).

2.4.3 White-collar labour-hire, technical tripartite contractors - general

The higher-skilled, higher-paid white-collar labour-hire technical contractor

cohort who are mostly employed by their employment agents have received much

attention in Australia (and overseas) with many authors not defining them

consistently. The literature ranges from describing them as ‘agency workers’

(Burgess & Connell, 2004), ‘contractors’ or ‘dependent contractors’, through to

‘independent professionals’ or more recently in Australia, UK and Europe, as

‘iPros’ (Leighton & Brown, 2013), and also in the European Union (EU) as

‘economically dependent workers’ (Eirobserver, 2002).

Some authors group many types under a definition of a ‘contingent

workforce’. For example the research by Chambel and Fontinha (2009) in Portugal

refers to contingent workers as ‘long-term contracted workers’, and in America,

Matusik and Hill (1998) use ‘contingent worker’ to define any type of alternative


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work arrangements. In Australia, Caddy (2014) shows that all those who are not

regulated as full-time employees are grouped under ‘contingent workers’,

including ‘outsourced professionals’ from another source (where the professionals

are employees of that source), and ‘independent contractors’. As a result, the

statistics of this cohort could be skewed and perhaps should be dramatically

inflated above the ABS figures to capture contractors and in particular dependent

contractors (Campbell, Watson & Buchanan, 2004) rendering the literature that is

available to be reviewed with a sense of caution as a number of peer review

journals project ambiguous statements.

2.4.4 White-collar CTR technical contractors – general

There is virtually no Australian or international academic literature that

focuses specifically upon the highly paid, highly skilled white-collar technical

contractors who operate through their own entities in a CTR. There is literature

by Leighton and Mckeown (2015) showing a growing interest in independent

professionals (iPros) and independent contractors within Australia, plus there is

literature in the UK and Europe, which tends to group the independent

contractors and white-collar labour-hire contractor cohorts together. There are

clearly some similarities, and one might be excused for not being able to

recognise the difference between them, except that the CTR contractors are

governed by commercial contract, i.e. Independent Contractors Act 2006 (Cth)

and the Competition and Consumer Act 2010 (Cth) (as are the direct CTR

contractors), whereas the labour-hire contractors are governed by employment

law, and there is no doubt that the indirect agency supplied labour-hire

contractors in Australia are employees of the agent.

It may also be argued that some of the contractors do fluctuate between the

two cohorts (contractors and employees) depending upon the requirements of a

particular contract at a point in time. Consequently, some of the literature

describing the high-end white-collar labour-hire topics may only be able to be


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used as a guide (including some of the negative aspects) as to what might apply to

the CTR contractors.

There is some academic literature that discusses the differences between

independent contractors and the labour-hire contractors, as in “Are independent

contractors really employees?” (Sutherland, n.d.) and, “Two Bob each way;

Employee or independent contractor?” (Powe, 1986). Rather than the personal,

interpersonal, managerial or social aspects of the different relationships, which

basically confirms that the typical white-collar technical specialist contractors

under this study have received little interest to date.

Even from the two largest users of non-standard work arrangements in the

world, i.e. United States of America (USA) and Europe, (Australia being the sixth

largest user), there is very little literature that is specific to the CTR actors. In an

American report by Cappelli and Keller in 2013, “A study of the extent and

potential causes of alternative employment arrangements”, they found that

there was support for the USA employers to enter into non-standard work

arrangements as a function of the ease of monitoring tasks and job performance

rather than economising on wages or flexibility. The findings appear counter

intuitive and in conflict with most, if not all of the international sources that

claim non-standard flexible work arrangements actually benefit hosts, as the

arrangements allow cost savings and flexibility (Mckeown, 2005; Walker, 2011).

Cappelli and Keller’s report also highlighted the fact that the incidences of users

of alternative work arrangements in the USA were irregular and skewed to those

who did use them extensively. They also commented that the presence of a union

within the hosts’ organisation in the USA might also increase interest in

implementing non-standard arrangements to circumvent union pressures (Walker,

2011). Nonetheless, according to Rob Stenz of Economic Modelling Specialists

(EMSI) there were four million technical and scientific workers engaged in 2011 [in

the USA] with approximately three million being ‘indirect’ agency workers and

one million being ‘direct’. Interestingly, in the 1930s the USA adopted a dual

employment system to primarily protect their labour-hire contractors from abuse


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from the hosts and the agents as a result of them attempting to circumvent their

legal employment responsibilities (Ellery, 2004). Joint employment in the USA

now allows two separate host organisations to exercise significant control over

the non-standard workers’ working conditions (Ellery Forsyth, & Levy, 2104).

When comparing American and European non-standard work arrangements

with the Australian methods of engaging contractors, one must also be cognisant

of the fact that the definition of the person performing the work in a non-

standard work relationship in these jurisdictions can be quite different. The

American Bureau of Labour Statistics tends to distinguish contingent workers from

alternative employment arrangements using such terms as ‘independent

contractors’, ‘temporary help agency workers’, ‘contract company workers’ and

‘on-call workers’ (Guest, 2004). Whereas the International Labour Organisation

(ILO) in Europe uses ‘Temporary Agency Workers (TAW)’ to define the workers in

a tripartite relationship. Interestingly however, the European Foundation for the

Improvement of Living and Working Conditions confirmed in their 2007 report

Temporary agency work in the European Union that it was impossible to provide a

description of the typical temporary agency worker (TAW) from across their

multiple jurisdictions, and they further highlight that it is also impossible to

provide an unambiguous characteristic of the TAW sector as a whole (Pedersen,

Hansen, & Mahler, 2007).

Similarly in Australia, the definition of a contractor may be a person engaged

either as a casual, or a short-term employee, or as an independent contractor on

a short-term contract or a contingent worker or even a part-timer. For a fuller list

of contractor definitions (see Table 1).

The European sector is further out-of-step with the Australian situation as

the International Labour Organization (ILO) in 2008 enacted The Directive on

Temporary Agency Work (2008/104/EC). The ILO directive provides equal

employment rights such as duration of working time, overtime, breaks, rest

periods, night work, holidays and public holidays and access to amenities or

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:327:0009:0014:EN:PDF


76

facilities, child-care and canteen access to agency workers in the European Union

(Expert Group European Commission, 2011). Not only does this directive apply to

the European employment agents but it also applies to commercial entities, which

includes an independent contractors’ entity, resulting in employment-like

benefits being attributed to contractors. This is not the situation in Australia.

Consequently, the varying definitions and differences in application of the

legislation in the different regions make it difficult to analyse a standard cohort.

Clearly then it would be unwise to draw strong comparisons between the

Australian and the American or European markets except perhaps to glean an

understanding of the USA’s dual employment methodology and Europe’s equal

employment rights, as these topics may potentially solve some of the uncertainty

issues within the Australian market. Unfortunately, the Australian literature on

the topic is nascent and, from what is available, it does not define how

contractors operate in the Australian market place (House of Representatives

Standing Committee on Employment, 2005). It can be seen that there are

conflicting titles for the workers performing the work in the CTR and there are

instances where authors make general statements about some workers who they

broadly label as contractors, but some of these workers may not fully apply to the

cohort under review for this thesis. For example Rawling (2006) confirms that

independent contractors have their own employees and service more than one

client simultaneously, and Walker (2011) indicates that the contractors’ work is

provided on a fixed term. Neither of these statements are totally accurate for the

contractors under this study as the Australian contractors tend to work for one

host at a time and they tend not to have fixed terms as they generally operate on

behavioural contracts.

2.5 IMPLICATIONS FOR THIS STUDY

The implications for removing the confusion from the CTR in the professional

and technical sector of Australia’s IT, mining, construction and engineering sector

can be termed essential and well overdue. Providing clarity for all of the CTR

actors by addressing the anomalies within the legislation will eliminate the reason


77

to create sham relationships and the potential consequential financial penalties.

The responsibilities of each actor should become clear resulting in better

management, better conditions for the contractors and improved OHS and return

to work statistics. Providing clarity should also remove the possibility of doubling-

up, or sometimes tripling-up, on expensive vicarious liability insurances and it will

also ensure that taxation can be managed efficiently.

2.6 GENERAL LITERATURE

A recent and interesting development within the literature on this topic in

general, has been the realisation from Australian and international academics

that the growth of contingent or precarious work relationships in its many guises

is challenging the relevance of the social, economic and political circumstances

that influence work arrangements and therefore the present labour laws that

regulate the temporary work industry (Johnstone et al., 2012). This has resulted

in several recent books, which examine the relationships that regulate

employment and the labour markets plus the future of labour laws and

globalisation. Some of the literature focuses on the boundary problem between

employees and contractors and others have focused on the vulnerable and have

examined precarious work and the influence of women on the growth of non-

standard work.

The Business Outsourcing and Restructuring Regulatory Research Network

(BORRRN), which researches the interface between business outsourcing,

restructuring, and international work published ‘Beyond Employment’ in 2012. It

is co-authored by six well-known Australian academics who also co-author

individually or jointly one or more chapters of the book on the topic of the future

direction of work relationships within Australia. The thrust of the book is to

review how the Australian labour laws are being reframed in the movement away

from the continuous employment paradigm, to the various forms of contracting,

labour-hire agreements, contractual chains, and franchising, rendering the

material within the book of value to this study (Johnstone et al., 2012).


78

Similarly, a group of eighteen international experts, from the UK,

Netherlands, Denmark, USA, Canada, Japan, Australia, New Zealand and the

European Union, contributed their research essays on the topic of ‘the growth of

temporary agency employment’ to create the book International Perspectives on

Temporary Agency Work (Burgess & Connell, 2004). The overall premise of the

book inspects temporary agency employment and its regulations on an

international basis with a view to its implications for the future of work and its

social consequences. Unfortunately, Burgess and Connell clearly state that “highly

skilled, highly paid, professional temps do not feature strongly within the[se]

chapters” (p. 20). Consequently, the book focuses upon the middle-to-low-skilled

cohorts leaving both the white-collar technical temporary workers and

contractors out of the discussions. However, the contribution to the book by

Campbell, Watson and Buchanan (2004, p. 129-142), in relation to the temporary

agency work in Australia, does highlight some useful and relevant material for this

thesis confirming that the regulation in Australia is sparse.

A third but independent group of international experts gathered in Italy in

2005 to discuss the boundaries and frontiers of labour law. The contributors

examined the various problems associated with atypical forms of work and the

blurring of the line between employees and independent workers. This also

resulted in the book Boundaries and frontiers of labour law: Goals and means in

the regulation of work (Potobski, 2007). Unfortunately, the three groups of

academics and their resultant books and literature rarely addresses the white-

collar professional technical contractors other than grouping them under contract

work as non-standard or precarious workers. Clearly, non-standard work

arrangements are causing many academics to consider the future of not only the

labour laws that are applicable to the non-standard work arrangements but also

the future of work and the social and political implications of the move away from

standard work.


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2.7 SUMMARY

This chapter has undertaken an analytical review of the main topics that

affect the CTR in the white-collar sector of Australia’s mining and engineering,

construction and IT consulting environments. It has also sought to discuss the

variations and idiosyncrasies within the relationship and has exposed the gap in

the literature and the theories relating to it by exploring the more common

employment-related theories to ascertain if one theory or a combination of

theories might be able to predict the unusual behaviour of the CTR.


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CHAPTER THREE 3.0 OVERVIEW

This chapter introduces and outlines the design and methodology of the

research used for this program of study to investigate the general behaviour of

the CTR with a focus on the potential confusion and control that may exist within

it. This chapter provides a clear and complete description of the specific steps

taken to enable the potential replication of the research. It also explains the

background and approaches of the methodologies that were used to research this

topic to provide clarity to all the actors within the CTR as stated in Chapters One

and Two. This chapter will close with an introduction to the data analysis and

findings that are displayed in Chapters 4 and 5.

3.1 RESEARCH DESIGN METHODOLOGY

The research design decision was based upon several factors as suggested by

Saunders et al., (1999) and Edmondson and McManus (2007), including whether to

adopt a mono, multi, or mixed-method study; reviewing the time horizon to

assess whether cross-sectional or longitudinal data analysis would be able to be

completed in a reasonable time frame; and whether the maturity of the available

literature and any prior theories would help recommend the methodology. The

epistemology and ontology of the author were also taken into consideration.

Due to the lack of prior empirical research, theories and literature

surrounding on the specific research topic, it was considered to be ‘nascent’.

Both Creswell (2003) and Edmondson and McManus (2007) concur that the most

appropriate methodological ‘fit’ or approach to research a nascent topic is

qualitative, as this will enable the phenomena to be fully explored, thus enabling

patterns of behaviour of the actors to be derived inductively.

Accordingly, where the authors stated that ‘methodological fit’ directs the

methodology, it was also felt that an additional empathetically developed

questionnaire, based upon the initial exploratory findings from the interviews

could be used to collect additional data from a broader sample of similar actors,

to triangulate the interview findings and extend the generalisability of the initial


81

results, whilst also providing a fuller understanding of the phenomena.

Edmondson and McManus (2007) maintain that a mixed methodology is generally

suited to an ‘intermediate’ theory, however, they do comment that data gathered

from different methodologies can be useful in the exploratory stages of a research

project, as it can generate hypotheses for later research, provide an opportunity

to explore the phenomenon, and to develop theory, new constructs and the

plausibility of new relationships.

The decision to perform a second-phase qualitative questionnaire was made

after further reflection upon the research question and from being cognisant of

the debate from some researchers (Hussein, 2009), who argue that performing a

different methodology does enable the researcher to reap the strengths from both

approaches whilst minimising their weaknesses (Scandura & Williams, 2000;

Bryman, 2006). After consideration, a two-phased sequential, cross-sectional,

qualitative methodological exploratory research approach, employing qualitative

interviews and a qualitative questionnaire was chosen to explore the phenomena

under study. The order of the methodologies was purposely selected to enable an

exploratory interview methodology to inform the second phase exploratory

questionnaire study. This was followed by a third phase of evaluation of the

overall findings (see Figure 11).

Phase 1 Phase 2 Phase 3

Qualitative data gathering Quantitative data gathering Merge data sets

Data analysis Analyse findings Compare results

Identify themes Present results Present results

Present results Apply themes for the

survey

Figure 11. Sequential exploratory design.

The chosen methodology enabled ethnographic qualitative research to

explore the lived experiences of each group of actors within the CTR, and then

use the gleaned data to inductively inform and to identify the themes that were

needed to assist the theoretical foundation and creation of the survey instrument.


82

Based upon these inductive themes the survey instrument was then used to gather

a volume of additional data from three nationwide samples of similar groups of

actors to those engaged in the interview methodology. Similar questions were

asked of the three groups and between methodologies thus enabling triangulation

and generalisation of the identified themes.

Moreover, the combination of the two data collection methods in this

exploratory design enabled triangulation (Creswell & Plano, 2007) of the data.

The survey built confidence that the initial interview findings can be confirmed

across a much broader setting in order to support the internal and external

validity of the methodology and to eliminate any common method variances

(Scandura & Williams, 2000). As the qualitative phase of the exploratory design

was designed prior to the findings of the interview data being generated, the

author was cognisant of the potential for surprising findings arising out of the data

which could have resulted in a redesign of the overall methodology (Bryman,

2006).

Consequently, the above supported the author’s decision to proceed with a

two-phased exploratory study with a particular emphasis on avoiding potential

threats to the validity of the whole of the sequential methodology during the data

collection phases of the research by; drawing both samples from different

populations of the same cohorts; by eliminating personal bias by using unobtrusive

data collection procedures, and also by choosing strong qualitative themes to

inform the survey instrument (Creswell & Plano, 2007).

3.2 PHASE 1, INTERVIEW METHODOLOGY

The initial phase of the research program was addressed with a grounded

theory style, cross-sectional ethnographic qualitative iterative exploratory

research study (Creswell, 2003). The study adopted a semi-structured interview

process to gather a rich description of the sociocultural systems in which the

actors work and interact with each other. The participants were recruited from a

broad sample of each of the three groups of actors (i.e., hosts, agents, and


83

contractors) within the professional and technical CTR in Australia’s mining,

engineering, construction and IT sectors.

As the author was the primary instrument for data collection, had previously

worked within the white-collar CTR for 29 years prior to this study, and had

already written a detailed Fellowship report (Dalby, 1995) on this topic for the

peak body of this industry, i.e., Recruiting and Consulting Services Australia

(RCSA), the author paid particular attention to preventing any personal bias to

support construct validity and to eliminate investigator subjectivity (Murphy,

Dingwall, Greatbatch, Parker & Watson, 1998). During the interview process the

author was therefore as explicit as possible so as not to reduce objectivity, and to

allow inductive conclusions to evolve (Burns, 1990; Morse & Richards, 2002). To

improve rigour, the author also requested that the interviewees review and

approve the draft reports before they could be used in this thesis (Yin, 1994). The

author was also mindful to not sit in judgment of the actors, but instead was

impartial, letting the data speak on its own terms thus enabling the author to ‘see’

what was surfacing rather than just ‘looking’ for problems (Woolcot, 1999). This

also allowed the author to direct future questions or to delve deeper into some

common themes as they emerged.

As highlighted in Chapter Two, three theories were used to focus and guide

the qualitative data interview questions, i.e. agency theory (Eisenhardt, 1989),


Zingales, 1997). These theories surfaced as being useful to guide the

understanding of the relationships between the actors. Using an iterative

approach to move back and forth between analysing the data, to the theory, and

back to the data again allowed the author to comprehend the data more fully and

to modify the interview questions where appropriate. Consequently, the initial

analytical findings shaped the future direction of the qualitative research

interviews, allowing the opinions from the actors to be probed more widely and

more deeply as they surfaced and time elapsed.


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3.2.1 Qualitative: ethics, limitations, consent and confidentiality

Prior to the commencement of any interaction with any of the actors within

the study, ethical clearance to perform the qualitative data collection was gained

from the Queensland University of Technology’s ethics committee (approval

number 1300000446). The study was evaluated as low-risk and it was therefore

approved to comply with the Australian code for the Responsible Conduct of

Research (Queensland University of Technology, 2012), including protecting all

human rights issues and the current laws within Australia including Queensland

Anti-discrimination Act 1991, and the Information Privacy Act 2009, which were

adhered to throughout the data collection process.

Also, prior to commencing any interviews, every interviewee actor was

provided with their relevant Participant Information Sheet (see Appendix F, G and

H), which informed them of the parameters of the study and requested their

approval to continue. All of the actors freely consented, without being pressured

or coerced to participate in the study by giving their permission to participate

both verbally and in writing signing the Statement of Consent page (see Appendix

F, G and H). This page also provided the opportunity for the actors to not

participate.

Consequently, all of the actors were informed that they could withdraw at

any stage without penalty or complication; that their comments would be treated

in strict confidence; and that their identities would be protected throughout the

study and afterwards. All of the actors gave permission for the interview to be

taped. Every interviewee also authorised and returned the participant information

sheets (see Appendix F, G and H) to the author who filed and stored them as

required by the QUT code of ethics.

3.2.2 Interview sample and recruitment

The interviewees were recruited from the three groups of actors (i.e.,

contractors, hosts and agents), who were the actors of the CTR under study. Also

where possible, the interviewees were from the top to bottom homogeneous tier


85

elements of their group, in an attempt to witness both general and dichotomous

behaviour. Two academics actors were also contacted and recruited by telephone

in order to seek their interest and advice, as it was felt that hearing their

experienced voices and opinions and listening to their insight and experience of

the tripartite relationship would be a valuable and relevant asset to the research.

These academics were also given the opportunity to read and approve the

statement of consent information sheets (by way of email) and to provide their

permission to participate by return email. All of the actors were therefore,

currently or had recently been, engaged in the contractual white-collar technical

or professional sector of Australia’s mining, engineering or construction, or IT

industries.

The samples of actors who were recruited for the interview study were all

based in Brisbane, in the State of Queensland, Australia, except for the two

academic actors who were contacted by telephone. Fifteen contractor actors

were recruited from a group of white-collar technical design type drafters,

tracers, contract administrators, procurement officers, engineers and IT

specialists, from the mining, engineering, IT and construction sectors of

Australia’s industries and who had more than a minimum of five years experience.

Most were male within an average age range of 30 to 65 years and an average

work experience ranging from five to 35 years.

The agents were recruited from a number of employment agents in Brisbane

who had operated or were still operating in the white-collar technical sector of

Australia’s mining, engineering, construction or IT consulting environments, and

who had supplied white-collar technical contractors for a number of years. Nine

agents were selected on the basis that they engaged with more than ten

contractors per year and had more than two years of commercial experience. The

hosts were recruited from a number of large Consulting Engineering organisations

in Brisbane who engaged more than 20 white-collar technical contractors working

on mining or engineering or construction or IT design projects.


86

Using more than one representative sampling strategy for the interview

phase enabled the author to gather information and to draw inferences about the

population without having to measure the entire population. The types of

sampling used were a mixture of convenience sampling (selecting interviewees

because they were convenient to access), purposive sampling (selecting

interviewees based on the judgment of the interviewer), criterion sampling,

(selecting interviewees that met the criteria above), iterative sampling, (moving

back and forth from the data outcomes to modify the subsequent interviewee

choices), and snowball sampling, (recruiting future interviewees from

acquaintances of present interviewees).

Convenience sampling was used to recruit most of the actors using existing

databases of contractors, agents and hosts, which were in the author’s personal

possession as a result of the author being engaged as an employment agent for

many years in the focal region of Brisbane. The contractors were not purposely

selected by gender but as the ABS, (2014) indicates that approximately 74% of

contractors are male then this ratio was the gender target ratio for the sample;

including those who also had operated with one or more of the following entities

i.e. Business name, Partnership, Trust or Proprietary Limited Company, and who

had worked in the Brisbane market for a minimum period of three years. The

hosts were a combination of human resource specialists, and/or senior engineers

who were responsible for hiring contractors to work within medium to large

consulting engineering or information technology consulting organisations in

Brisbane.

The interviewees were identified from the databases of the three types of

actors and approached by telephone until there were a number of actors of each

category willing to assist. The initial target was to recruit as many actors from

each group of actors until saturation (Teddie & Tashakkori, 2009) was experienced

i.e. when no new information was achieved to assist the theme development.


87

During the initial telephone conversation with the actors, the potential

interviewees were made aware of the scope of the research and of the ethical

requirements surrounding the collection of the data, such as their right to

withdraw and that their contribution would be dealt with in a confidential manner.

Further, the potential actors were purposively inspected for matching the above

criteria in order to provide useful data for the study, using the author’s previous

knowledge of the population.

Where there was some difficulty in recruiting actors to interview, the author

employed the snowball sampling approach, asking the already recruited actors if

they could provide information needed to locate other suitable actors of that

population whom they knew and perhaps could be recruited to assist the study.

The author also requested assistance from the Recruiting and Consulting Services

Association (RCSA), and The Information Technology Contract and Recruitment

Association (ITCRA) to contact all of their members in Queensland to solicit

assistance. As a result, the head offices of RCSA and ITCRA in Melbourne

performed email ‘mail-outs’ to over 400 potential agent actors in Queensland,

using a recruiting email, based on the participant information sheet, which

outlined the project methodology along with the ethical requirements of the

research. This resulted in five additional agent actors being interviewed. Later, as

a follow-up, the Queensland branch of the RCSA verbally advertised this research

at one of their board meetings, which again resulted in a further two agent actors

being recruited bringing the total number of agents interviewed to nine. The two

Australian academics who were experienced in the on-hire tripartite contract

relationship were also contacted by telephone and recruited to provide an

interview on the subject being studied. Both of these actors had substantial

knowledge of the employment tripartite relationship, which was useful to relate

to the CTR area under research.


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3.2.3 Qualitative interviews

Thirty-three face-to-face actor interviews and two academic telephone

interviews (15 contractors, 9 hosts, 9 agents and 2 academics) were performed to

explore the lived experiences of the actors’ CTRs with generally open-ended

questions in a similar manner to an everyday conversation. These interviews

lasted approximately 40 minutes for each actor of the three types of actor groups.

In some instances, the interviews were longer than 40 minutes where the

interviewees were comfortable to expand upon topics that were important to

them. Even though the process was iterative most questions on the researchers

‘list’ were asked of the interviewees without them being rushed or made to feel

pressured. Due to the slight variations of the cohorts, 32 questions were prepared

for the contractors, 34 for the hosts and 39 for the agents.

Some contractors were not as articulate as others, as three contractors were

foreign nationals with the English language not being their first language.

Consequently, these three contractors struggled a little with their responses and

the author was mindful to not allow this to result in them giving answers that

satisfied the interviewer rather than truthful information. The author was also

mindful of the actors’ time constraints resulting in the interviews being

conducted in mainly quiet and neutral locations using a combination of

boardrooms and coffee shops, at arranged times that were convenient to both

parties and where the interviewer could quietly tape the interview whilst

observing unusual aspects of non-verbal behaviour i.e. unusual body language of

the actors.

The author was also cognisant that some of the contractor interviewees

might have felt a little vulnerable and perhaps concerned that the findings of

their interview might expose their potentially dubious employment/engagement

status to their present hosts. To mitigate these concerns, at the start of each

interview, the interviewer restated that confidentiality was important and


89

reminded all interviewees that if they felt concerned at any point in time during

the interview, then it could be stopped.

The interviews, however, were thorough yet purposefully gentle to

encourage the interviewees to respond freely to the questions, which were

presented in a reasonable manner to generate truthful and open accounts of the

lived topic and also to ensure that someone else could replicate them if required.

This also provided reliability and validity and a confidence that the actors

attempted to provide a genuine and honest contribution to the study.

The interview questions were guided using topics and subject headers to

keep the interviews on track using the nodes that became apparent through the

iterative experience (see Appendix L.), and to avoid reflecting any personal bias

of the author. It also enabled the author to explore each interviewee’s

perceptions on all of the topics under study if some of the topics did not arise in

the natural course of the interviews. The semi-structured style of interviews were

performed in a time frame to comply with the actors’ availability, but with a

preference to select one actor from each of the three groups of actors before

moving on to the next three actors, so that a generalised picture could broadly

emerge from across the sample as early as possible. This iterative process shaped

future interviews as new topics arose and required exploration. At the conclusion

of each interview, the interviewees were offered the opportunity to ask questions

or add any further information and to check the interview notes for accuracy. The

interviewees were also offered the opportunity to receive the findings of this

research in the form of a copy of the completed thesis, and reminded that the

QUT Ethics office was always available to them via the telephone numbers on the

participant information sheet, should they feel that they needed to make any

positive or negative comments regarding the process.

The two academics were interviewed via telephone. However, they were

treated in the same manner as the other actors except that they were issued with

their participant information sheets via email.


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3.2.4 Interview data preparation

The interviews were taped with the assistance of a solid-state voice recorder

and the recordings were transcribed verbatim by a remote, confidential and

independent transcriber, who also agreed to abide by the QUT code of ethics by

signing a QUT ethics confidentiality document. The transcriptions were performed

as soon as possible following the interviews, noting pauses and changes of tone

(Miles & Huberman, 1994) resulting in more than two hundred and fifty pages of

double-spaced typed interview data. To preserve confidentiality, the names of

the actors and their organisations were removed from the texts and the digital

copies of the interviews were saved to a QUT computer file housed at the

University, as required by the QUT code of ethics approval number 1300000446. A

hard copy print of the data was also made and kept by the author for analysis

purposes. At the conclusion of the thesis these hard copies were destroyed as

required by the ethics committee of the QUT. The data was also deleted from

Nvivo.

To enable the data to speak (Denzin & Lincoln, 1994), and for the author to

gain an insight and understanding of the phenomena under investigation (Schurink,

2001), the transcripts were read a number of times after each interview for

overall understanding of the actors’ responses, during which time the author

made notes in relation to whether elements of the data were primary (first-hand

accounts) or secondary (second-hand accounts) data. The accurate transcripts

were then imported into the ‘QSR Nvivo 10’ (QSR, 2013) Nvivo software package

where they were prosecuted manually, through ‘condensation’ and

‘interpretation’ (Marshall & Rossman, 1989) by reading and listening to the tape

recordings a number of times whilst making notes and manually sorting the data

within Nvivo. The software was only used to organise the data, it was not used to

indicate any word counts or provide predictive relationships. The data were

electronically coded within Nvivo and grouped into similar items according to

defined properties by giving them broad themes names (parent nodes) that stood

for common links as the topics emerged. Consequently, the data were manually


91

conceptualised and thematically coded in the style of grounded theory approach

to data analysis (Strauss & Corbin, 1998) to enable the author to make sense out

of the data either manually or with the assistance of Nvivo.

Initially the parent nodes were quite general, however, as the number of

interviews were processed and as other themes emerged, then the nodes were

continuously refined, or added to, resulting in 29 parent nodes which were later

divided into three child nodes (one for each group of actors) per parent node

resulting in 87 child nodes in total, from 38 interviews from the three groups of

actors (plus the 2 academic interviews) (see Table 3).

Appendix L displays the list of 29 parent nodes. This initial general coding

was followed by a more detailed investigation of the 87 child nodes to further

condense the themes to a smaller number of grandchild nodes allowing the

important emerging themes to became apparent. Reducing the data gleaned from

each type of actor group this way allowed the author to refine the analysis to

provide a feel for the differing or converging opinions of the individual groups

when faced with similar questions. For example, in Table 3 the PSI tax rule was

condensed from 22 general references to 14 more focused statements from the

agents, contractors and hosts, which were again condensed into 8 meaningful

statements in total regarding the PSI tax rule. This process was used for all of the

parent nodes. This qualitative analysis also enabled triangulation and provided

internal validity, and a confidence that the three groups provided consistently

similar or consistently dissimilar responses to the author’s questions.


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Table 3

Sample of nodes showing parent, child and grandchild nodes

Parent node Sources Child node Filtered G/Child

PSI tax Rule 22

Agent 4

Host 3

Contractor 7

8

Asymmetrical Information

18

Agent 7

Host 1

Contractor 2

6

Behavioural basis

15

Agent 1

Host 3

Contractor 8

4

Conflict 16

Agent 6

Host 8

Contractor 9

6

The child nodes were constructed manually using the Nvivo software only to

organise the data rather than using the computer to perform this condensation

activity. The author wanted to emulate a grounded theory approach by sensitively

monitoring how the variables were interacting and to be aware of the potentially

emerging theoretical constructs (Galser, 2005) in order to draw a meaningful

understanding from within the concepts, rather than relying upon the computer to

extract data from preconceived frameworks. These third-data condensations were

referred to as grand-child nodes and were extracted and presented on one ‘Word’

document comprising of three, side-by-side, columns, i.e. one column for each

group of actors. This enabled the author to visualise more easily the common

threads that surfaced from within each group. These common threads were then


93

presented again on another single Word document for each topic indicating the

general condensed feelings from across all three sets of actors for each of the

topics and referred to as “Filtered grand-child nodes”.

At the conclusion of the qualitative data inspection there were 29 parent

nodes with 87 child-nodes and 29 grandchild nodes resulting in 29 Word

documents displaying the filtered inductive conclusions (see Table 3) an example

of a grandchild node (‘Filtered’) (Miles, Huberman, & Saladana, 2014).

In many cases the inductive conclusions under each of the grandchild nodes

were readily visible, however, where there was less clarity on a topic then the

author resorted to counting the data themes within the grandchild nodes to

establish which themes were dominant. The author was cognisant that quantifying

data may take away the richness of the themes within the qualitative data and

consequently was careful not to strip the data from its context as is warned by

Miles and Huberman (1994). This quantification did however highlight more

clearly a few of the themes, for example it indicated the anomaly between the

comments suggesting which actor thought that they employed the contractor as

against which actor thought that they were responsible for the contractor. The

quantitative coding counts of the qualitative data as seen in Table 4 below shows

that in a direct relationship the contractors said five times that they were

employed by the host, but only twice did they say that the host was responsible

for them. In the same direct relationship the host did not say that they employed

the contractor at all and neither did the host say they were responsible for the

contractor. This quantitative method of interpreting qualitative data did provide

the necessary clarity for the author to witness the dominant themes, resulting in

the independent voices of each group of actors, relative to each qualitative

theme to be identified (Miles and Huberman, 1994).


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Table 4

Screenshot of quantitative analysis of the qualitative data

Direct relationship Indirect relationship

Agent Contractor Agent Host Contractor Agent Host

Q1. 2 0 4 1 3 3

Q2. 1 0 3 1 2 1

Contractor

Q1. 2 0 5 0 8 0

Q2. 1 0 2 1 4 1

Host

Q1. 2 0 0 4 3 3

Q2. 0 0 0 1 1 3

Q1. Who employed the Contractor? Q2. Who was responsible for the Contractor?

Collecting the qualitative data this way from the three groups of actors who

potentially held different opinions regarding the operation of the CTR and who

were demographically and socially diverse, also provided a powerful means to

develop a grounded theory (Bartunek & Seo, 2002), and a platform for the second

phase survey methodology from which to further confirm or disconfirm the

themes from a wider statistical sample of similar groups of actors.

The themes were also used to assist the author to collate the qualitative

data into the important topics and hence tables for a more simple analysis. The

tables are shown in Chapter Four.

3.3 PHASE 2, SURVEY METHODOLOGY

The second phase of the study was performed using a survey approach.

Participants were issued with an electronic questionnaire consisting of closed and

open-ended questions and delivered using the QUT ‘KeySurvey’ instrument

software (KeySurvey, 2015). The questions were based on the gleaned iterative

output from the interview phase above. Participants were once again sought from

each of the three groups of actors, and each group was issued with their own

dedicated survey. Each set of surveys (see Appendix N) contained exact or similar

questions under the same topics to ensure that the perspectives of each set of

actors were comparable.


95

A wider nationwide sample of the same actors (i.e., agents, contractors

and hosts) was initially targeted unlike the Brisbane based interviews. To assist

with the survey phase of the study the author recruited the assistance of:

Professionals Australia (PA), formerly Association of Professionals Engineers,

Scientists and Managers, Australia (APESMA); Recruitment International (RI); and

the Recruiting and Consulting Services Association (RCSA) which is the leading

industry and professional body for the recruitment and the human resources

services sector in Australia and New Zealand representing over 3,300 company

(agents) and individual (contractor) members. The Information Technology

Contract and Recruitment Association (ITCRA), which is the pre-eminent

professional body for Information Technology recruitment and contract

organisations and suppliers, also across Australia and New Zealand was also

recruited to assist.

Additional help was also requested of Engineers Australia and the

Independent Contractors Association (ICA) who were recruited to assist with

forwarding the email surveys to their membership.

For the peak bodies that have access to two groups of actors i.e. agents and

contractors, then a fourth combined survey was created to simplify the issuing

process for the peak bodies. This combined survey contained embedded logic to

enable either of the actor groups to complete their survey without either seeing

or interfering with the other groups’ responses.

All of the above peak bodies generously assisted by emailing the survey

instruments to their respective membership and by placing advertisements on

their web pages and newsletters to attract their members to participate in the

surveys. This provided a potential target sample size as follows; Contractor size of

PA 3000, RCSA 1500, ITCRA 500, RI 500. The responder rate was anticipated to be

approximately 5% and if so this might result in a workable sample size, which

would have been adequate for analysis. Thirty–six electronic surveys were


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received from the three cohorts with the assistance of the major peak bodies,

resulting in the survey data being acceptable as qualitative findings.

The host actors were more difficult to locate however the author used a

mixture of convenience sampling (selecting host actors because they were

convenient to access), purposive sampling (selecting host actors based on the

judgment of the interviewer), and snowball sampling (recruiting future actors

from acquaintances of present host actors and interstate counterparts).

Where some of the actors were not members of the peak bodies then they

were approached individually either by telephone or email or with the assistance

of some of the friendly interstate actors who the author had previous dealings

during his career as an employment agent. These single actors were targeted by

snowball sampling, social media, telephone and email.

As the survey was targeted to be exploratory the benefits of a pilot study

were deemed to be negligible, however prior to issuing the survey instrument, all

of the surveys were checked by local friendly actors who were accurate for the

research and understood the reasons for testing the surveys and its incumbent

logic without completing them in a formal manner.

3.3.1 Survey procedure

Prior to the issue of the surveys, the survey questions, the participant

information sheets, the candidate consent form, the letters to the peak bodies,

the peak body advertisements and the typical emails to the actors, were all

approved for distribution by the QUT Ethics committee, with a modification to the

previous Ethics authorisation number QUT ref no. 1300000446. The surveys were

checked and approved by both the author’s supervisor and the QUT KeySurvey

personnel before being formally released to the three groups of actors and the

supporting organisations.

Where the peak body organisations were also helpful in encouraging their

membership to forward the surveys to other accurate member-actors, they also


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issued the ‘Participant information sheet’ (see Appendix M) and the ‘Participant

consent forms’ (see Appendix M) so that the ethics of the methodology were

maintained.

3.3.2 Survey process

The results emanating from the interview methodology informed the survey

design so that the opinions of the actors interviewed in the first study could be

triangulated with the survey data and cross-checked between and amongst

additional members of the three groups.

The three surveys were initially issued on a nationwide basis to the three

groups of actors’ membership as described above. Unfortunately, the initial

nationwide response was disappointing, yielding a very small response rate.

Therefore, a second more focussed and personal approach was adopted with a

hard copy of the survey mailed directly to the three groups of actors in the state

of Queensland. This approach resulted in an improved response rate from the

contractors and the host groups, resulting in a further five usable surveys.

However, the agents required a further initiative resulting in the author making a

presentation to the Queensland branch of the RCSA to appeal to their membership

to respond more enthusiastically. This did result in a further four agent responses

for a total of nine usable agent surveys. In total 36 surveys were completed, 17 by

the contractors, 11 by the hosts and nine by the agents.

As the surveys were the first of their kind to be issued to the highly-paid

actors of the CTR, it appeared to the author who has many years of experience

working with the contractors that they were reluctant to lose pay to complete the

surveys, resulting in the response rate being low. Consequently, the survey data

was analysed in a non-inferential but qualitative manner with the results enabling

comparisons to be made alongside the qualitative interview data.


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CHAPTER FOUR 4.0 OVERVIEW

The interviews and the surveys were purposefully designed to explore the

nature of the CTR phenomena and to prosecute the opinions of the actors (and

the two academics) in relation to the day-to-day application of the CTR. The

primary goals were to investigate the interrelated relationships of the actors and

to ascertain whom they felt was responsible for the employment (or engagement)

of the contractors and therefore who was responsible for the resultant

employment liabilities. The participants were also asked to respond to questions

that would assist the understanding of the application of the three theories that

were used to inspect the CTR, i.e. agency theory (Eisenhardt, 1989),

psychological contract theory (Guest, 2004) and the theory of power (Ranjan &

Zingales, 1997).

The combination of interview and survey methodologies has resulted in a

large volume of findings, therefore the analysis, interpretation, and discussion of

the combined results will occur in Chapters Four and Five. Both chapters compare

the interview findings will occur in Chapters Four and Five. Both chapters

compare the qualitative findings and the survey responses to allow an efficient

interpretation. The topics of interest, however, have been naturally divided;

Chapter Four will review and analyse the wider contextual findings that surfaced

outside of the theoretical lenses. Chapter Five will review and analyse the

interview and survey findings that became apparent through the theoretical

lenses of agency theory (Eisenhardt, 1989), psychological contract theory (Guest,

2004) and the theory of power (Ranjan & Zingales, 1997). Summative findings are

also provided in both chapters.

4.0.1 Findings and discussions

As this research is a qualitative exploration, data were gathered from

interviews and then used to direct the design of the qualitative surveys to further

examine the emergent themes and sub-topics with the other groups of CTR actors.

Thus providing for data triangulation and confidence that the themes and sub-


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topics emerging were reliable and valid. As the face-to-face interviews were

semi-structured with open-ended questions and an attitude from the interviewer

to let the respondents open-up to provide rich data, then this also provided

additional unexpected but relevant data, which emerged outside of the above

theoretical lenses. These data were collected and reviewed under the heading of

‘wider contextual data’ and are presented in the order of: Demographics, Reason

for CTR, Employment v Engagement, Employment (direct and indirect),

Responsibilities, Insurance, Taxation, 80/20 Rule, Legislation and Summary.

For ease of interpretation the ‘wider contextual data’ is broken down into

the topics of interest with the voices of the three groups of actors being displayed

in summary tables (mostly three columns by three rows) relevant to the topics. As

these data are voluminous only a representative sample of the voices from each

group are displayed. The full data relevant to each topic and each voice are

available in Appendix L.

4.0.2 Demographics and general statistical findings

There were a total of 69 useable responses to this research; 33 interviews

and 36 surveys (see Table 5).

The demographics of the contractors (see Table 6) portray an ‘average’

contractor to be a 48 year old male, (or a 50 year old female). Who, according to

the contractors, are incorporated and trade via a propriety limited company on a

contract basis in the hosts’ offices in either a direct or indirect manner.

Table 5

Responses to surveys and interviews

Interviews Surveys Total

Contractor 15 17 32 Agent 9 8 17 Host 9 11 20

Total 33 36 69


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Table 6

Demographics of the contractors

Male Female

n = 32 30 (94%) 2 (6%)

Interviewed Surveyed Average age

14 16

48*

1 1

50* Over 40 yrs. 83% 100%

Pty Ltd companies or business name. 83% 100%

*Average age of contractors as survey responders and interviewees

The average length of the contracts were for periods longer than one year

(see Table 7). However, 64% of the hosts and 100% of the agents, felt that the

average length of contract was less than one year. The findings also indicate that

55% of the contractors reported that their average contract term was longer than

one year, with 38% indicating that they were engaged for more than 18 months,

and 27% indicating that they were engaged for more than two years.

Table 7

Average length of the contracts

Contractor % Host % Agent %

6-9 months 0 0 50

< 1 year 44.3 64 100

> 1 year 55.4 36 0

> 18 months 38.8 0 0

> 2 years 27.7 0 0

> 3 years 11.11 0 0

Interestingly, 94% of the contractors indicated that they performed their

work in the hosts’ offices (see Table 8) and 82% indicated that they were

integrated all week in the hosts’ offices with 71% (see Table 9) of the contractors

also confirming that they were controlled by the host on a full-time basis.

Twenty-four per cent of the contractors also commented that their cohort was

unaware of their contractual conditions.


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Table 8

Where does the contractor work?


Contractors office 35 0 0

Hosts office 94 100 100

Agents office 5 0 0

Table 9

Integration, control, and contractual conditions


Integrated all week* 82 64 88

Controlled by Host 71 73 100

Controlled by Agent 0 - -

Unaware of contract conditions

24 - 13

* In hosts office

4.0.3 Reason for CTR

The findings emanating from the hosts’ interviews were confirmed in the

survey responses, revealing that engaging contractors allowed the hosts to

manage their peak workloads. They could quickly ‘hire and fire’ contractors

without the fear of breaching employment legislation, i.e. potential redundancy

pay-outs or threats of wrongful dismissal, and sick and annual leave entitlements.

One host commented “he was happy to engage contractors as it allowed him to

get a piece of work done and then get rid of the contractor”.

The data received from the agents’ indicated that they were involved in a

CTR simply to make a profit. However, the data does also show that the agents

made comments on the wider topic stating that the contractors were only

involved in CTR for the money, and that the hosts did not want the payroll, or the

liability issues. These situations provide an opportunity for the agents to assist

both parties as they can remove the payroll duties and employment liabilities


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from the hosts and secondly offer well-paying opportunities to the contractors

whilst generating a business income by servicing both of them.

The verbal data emanating from the contractors’ comments in relation to

the question regarding why they chose to contract was also confirmed by the

survey findings. Contractors stated that they could enjoy a beneficial and an

attractive working environment, with lengthy contracts (direct and indirect) that

paid better than if they were staff employees. The data also showed that being in

a CTR provided a stimulus for the contractors, as they were able to gain more

knowledge, be more mobile, operate without financial risk, and work in an

environment where they only had minor responsibilities for taxation, insurances,

or for correcting their own work errors. One contractor commented that when he

was in a permanent role that he was just “brain dead”. Another added that he

could get more knowledge by being more transient, and another commented that

the politics of a permanent position “drove him nuts”. These last three comments

indicate that being employed permanently by a single employer does not suit

everyone and that the three contractors making these statements clearly prefer

the variation that contracting provides for them.

The survey findings in relation to the comments explaining why the actors

engage in a CTR indicate that (see Table 11) 82% of the hosts liked to hire

contractors (either in a direct or indirect manner) because the contractors

provided flexibility for their organisation, and secondly 55% confirmed that they

were also able to reduce their overheads by avoiding employment liabilities.

However, only 9% of the hosts felt that hiring contractors was a method to reduce

their liabilities and none said that it was a method to take advantage of the

current legislation. This point is contra to the data emanating from the

‘legislation’ investigations where a contractor’s wife commented, “that they

would be stupid not to take advantage of the situation” (see Table 10 and 54).


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Table 10

Reason to be involved in a CTR


It all comes down to money. We are better paid than employees and have the same job security and benefits. You would be stupid not to take advantage of the situation.

The beauty of having a contractor available is because it does give you that flexibility, as it is much easier to mobilise a contractor.

I think a lot of it is because the host can’t get approval for the headcount so they bring them through the backdoor; through procurement.

It is not about

flexibility, It’s about finance.

It provides the

flexibility to let go of them.

They are a

moving workforce. Quick in, and quick out, it’s easier to mobilise a contractor.

The income far outweighs the inconvenience of the flexibility.

If you have a quick need for specific skills you can go to the market, you can find the contractor. You pay a premium and you get what you want and once it is done it is done. So it’s an easy engagement and an easy completion from an employment

relation point of view.

We can dispense with the contractors with little or no notice.

The survey findings (see Table 11) relevant to the contractors’ responses

indicated strongly that 78% of them contracted for remuneration, and that 56% of the

contractors confirmed they also wanted a flexible life style. As 83% of the contractors

did not indicate that contracting was a pathway to a permanent role, this provides a


104

strong indication that contracting was a deliberate decision on their behalf. It is worthy

to recall that the average age of the contractors was 48 years and is comparable with

the ABS 2006 census report, which states, “part time work has been taken up by

people approaching retirement and reducing their hours” (Australian Bureau of

Statistics, 2006). These older contractors can maintain their flexible lifestyles whilst

earning good rates as they approach retirement.

There were no survey findings from the agents in relation to the reason to be

involved in a CTR. However, the agents did offer opinions in their interviews as to why

the hosts and the contractors were involved stating “the hosts are in it because they

cannot get approval for their head count” and “the contractors are in it but they

couldn’t give a damn about it, they want a job”.

Table 11

Additional Reasons to be involved in a CTR

Reasons to contract Contractor % Host %

Remuneration 78 -

Flexibility 56 82

Lifestyle 50 -

Opportunity to learn 44 -

No other opportunity 44 -

Encouraged into it 44 -

Tax advantage 37 -

Forced into it 28 -

Pathway to permanent 17 -

Reduced overheads - 55

Reduced perm head count - 36

Easier recruitment - 36

Easier to let them go - 27

Cheaper recruitment - 9

Reduced liability - 9

Take advantage of legislation - 0

Clearly the signature of this relationship after reviewing only Tables 5 to 11

resembles one of a master/servant relationship, or employer to employee

relationship, with the contractors being integrated and controlled by the host for

all the working week and where the contractors are not at financial risk.


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4.1 THE WIDER CONTEXTUAL DATA

Undoubtedly the most discussed, controversial and confused topic that

surfaced, was that of confusion surrounding whether the contractors were either

employed or engaged within the CTR and if employed, then by whom. This

outcome was not surprising as even the courts have provided inconsistent rulings

as to which cohort employs the contractor. For example, the Odco case (see

Appendix A 1.0) ruled that there was no employment arrangement within the CTR

as the contractors are engaged on commercial contracts, yet the judge in the

Stevens and Brodribb case (see Appendix A 2.0) found after considering a

collection of factors, that an employment relationship does exists within a CTR.

Further there is a growing mismatch between the realities of work arrangements

and the legal categories of work (Underhill & Quinlan, 2011), resulting in the

contractors being unsure as to where they fit.

The common themes to emerge from the three groups of actors relative to

the wider context of the CTR included, ‘employment or engagement’, ‘confusion

regarding employment’, ‘sham relationships’, ‘responsibilities’, and ‘taxation’.

The findings are discussed below.

4.1.1 Employment or engagement

The data showed very few voices from any of the actors from the three

cohorts stating that the contractors were ‘engaged’ rather than ‘employed’.

Unfortunately this is a fundamental point that complicates and confuses most

topics within the CTR, as the contractors are either directors of their own entity

or employees of their own entity. The agent does not employ them; only on-hire

agency casuals are employed by an agent.

Interestingly, the majority of the actors used the word ‘employed’ to

describe the engagement of a contractor, even though the survey data confirms

that 77% of the contractors used entities to trade through and were not

technically employed. Consequently, the topic of confusion as to which of the

actors employed the contractors was further explored.


106

This point goes to the heart of the CTR research, and this thesis. Without

clarity of how or who employs or engages and thereby manages, insures, or

controls the contractors and takes responsibility for their actions and output, then

some of the actors could be in breach of the employment legislation and

potentially be at financial risk as outlined in Chapter Two. Even where the

contractors are engaged in accordance with the legislation under contracts for

service their ‘engagement’ indicia may show that the contractors should have

been employed under contracts of service as employees of either the host or the

agent and may therefore be deemed as employees of one of the actors should the

relevant authorities ever investigate these situations.

4.1.2 Employment or Engagement

The interview data on this important topic pointed to a different outcome to

that which resulted from the survey. The data from the hosts’ interview responses

were obtuse, with the interviewer gleaning a sense that the hosts did not want to

directly admit to being the employer of the contractors (see Table 12 for a typical

comment).

Additionally, the interview data indicated that five hosts confirmed that the

host was the employer of the contractor when the contractor operated in a direct

manner. Two more hosts were ‘not sure’, and one host thought differently

suggesting that it was the agent who was the employer of the contractor, even

though the agent was not involved at all in a direct relationship. Clearly the hosts

displayed a lack of understanding as to how the contractors should be engaged, as

a truly independent contractor would not need direction or need to be treated as

an employee. It is further suggested that having contractors for extremely long

time periods (e.g., 18 years) would result in these long-term contractors’ indicia

representing those of an employee. Such an approach potentially places the host

and the contractor at financial risk by breaching the employment legislation and

consequently at financial risk of backdated (potentially for the last 18 years)

employment liabilities.


107

When the contractors were asked who they thought employed them when

they operated in a direct relationship they indicated that this was a grey area and

that there was confusion in relation to whether they were employed or engaged.

Four contractors confirmed that that their host was their employer when they

operated in a direct manner. However, a lack of understanding of how to engage

contractors is evident again with the contractors expressing mixed opinions as to

who they thought employed them when the question really should be “Who

engages them?” Further, independent contractors would not normally be engaged

on long one to three year contracts or require a trial period as these features

signify employment rather than engagement.

Table 12

Who employs the contractors in a direct relationship?

Contractor Host

I'm not sure of the answer there.

They are employed for a job but not employed by us.

When I am direct my entity employs me.

I don't know [who employs the contractors].

The host employs me. Not us.

Even though I have an entity the host employs me.

We direct them but we shouldn't.

It's definitely a grey area. Long contracts could be different, as after 12 months it could be different.

I was trialled for 3 months. We would treat them like employees.

My contracts are from 1-3 years.

We have contractors here that have been contractors for 18 years.

The data showing the comments from the contractors who operated in a

direct manner also indicated confusion.

Reviewing the same topic when the contractors operate via an agent (in an

indirect relationship).


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Table 13

Who employs the contractors in an indirect relationship?


Definitely the host. We are the employer; they are working for us.

It is difficult for a judge to decide.

The paperwork might have said that the agent employed me but the host

employed me.

We take responsibility for their work.

It’s a conundrum!

Even though I had an entity the host was the employer.

I believe that after 12 months the host is then deemed an employer of the independent contractors.

It’s not us it is the contractor and the host.

Even though I have been here for 6 years I do not feel like an employee of the host.

Authorities may deem the relationship to be an employer-employee [relationship].

We employ them.

The agency does not employ me they are an agent.

So the agency is the employer, not us.

They are employees of whoever pays them.

I have to be employed by both the agent and the host.

We employ the agent, so the agent is the employer, not us.

We consider our Pty Ltd contractors our employees.

The host employs me.

We treat them as an employee.

We don’t identify them as ours.

The agency is the employer.

It’s the agency. The host does not want to employ them.

It’s a grey area, isn’t it?

There is a real grey area around this.

My company employed me.

They are the agents’ employee.


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The hosts’ comments can be seen in Table 13. Taken together these findings

provide further confirmation of a confused picture. The hosts indicated that it

was either the host or the agent who was the employer, but there are many

comments implying a vagueness of understanding, suggesting that the hosts

should not take responsibility for the work of the contractors or believe that the

contractors become employees of the host after a 12-month period. It was also

commented that they should not treat the contractors as employees, as the

contractors are supposed to be independent and at financial risk.

When the contractors were asked whom they thought employed them when

they were operating in an indirect manner, they provided mixed opinions as to

who employed them (see Table 13). With the host, the agent and their own entity

all being nominated as their employer when they operated via an agent. One

contractor suggested that it was both (jointly) the host and the agent who

employed them, yet technically neither employs the contractors as they are

engaged.

One contractor interestingly commented that he disregarded his

employment contract with the agent, to confirm that the host employed him.

Another suggested that even after six years of contracting to one organisation

that he did not feel as though he was an employee of his host. Unfortunately,

after a long period of contracting, an audit by the relevant authorities may see

this differently. This contractor was controlled and integrated by the host and

was not at financial risk, suggesting that this contractor may resemble an

employee, resulting in the host or the agent (either severally or jointly) being

potentially responsible for the contractor’s employment liabilities for the past six

years.

From the perspective of the agents, the data emanating from the interviews

confirmed that when the contractors were operating in an indirect manner that

the agents had conflicting opinions as to who employed the contractors (see Table

13). Some agents claimed that it was the hosts who were the employers of the


110

contractors. Some agents claimed that they did not employ them; another agent

said it was even difficult for a judge to decide.

Interestingly, other agents contradicted these comments with several of

them confessing that they were confused and that the system was not well

understood or that it was a grey area. One agent, who had been supplying

contractors to large engineering consultants in the Brisbane region of Queensland

for 23 years, confirmed to still being confused as to who employed the

contractors in a CTR. Another commented, “It was a conundrum”. Interestingly,

one agent volunteered that it employed the contractors as a service to the host

who did not want to employ the contractors directly, presumably to avoid his

potential employment liabilities. Another agent verbally reiterated his ‘corporate

stance’ on the subject but was smiling wryly and winking knowingly over the tape

recording, suggesting that what he was not conveying his personal opinion.

From the survey findings (see Table 14 and Figures 12 and 13) it can be seen

that when the contractors were

operating in an indirect manner, 44% of

them commented that they felt their

employer was the agent and not the

host, or their entity at 17% and 22%

respectfully. In an indirect manner 63%

of the hosts also said it was the agents

who employed the contractors, and

100% of the agents commented in

agreement that they were the contractors’ employer. Overall the consensus was

that the agent was indicated to be the employer of the contractors when they

operated in an indirect manner.

Conversely, when the contractors were engaged in a direct manner (see

Figure 13) and therefore without the involvement of the agent, 63% of the hosts

and 63% of the agents agreed that it was the contractor who was the employer of

Figure 12.0. Indirect relationship. Who employs the

contractor?

HOST

AGENT CONTRACTOR

63

0

0

27

44

17

10

100 22


111

the contractor. 61% of the contractors rejected this indicating that it was the

host who employed the contractors in a

direct relationship. However, only 18% of

the hosts and 25% of the agents agreed

with the contractors in this scenario.

Overall then, it can be concluded from the

survey findings that when the contractors

operate in an indirect manner, the agent is

felt to be the employer but when the

contractors operate in a direct manner

then there is confusion as to whether the contractor or the host is the employer.

Table 14

Survey findings. Who employs the contractor in an indirect and direct relationship

Contractor

Host

Agent

Indirect

% Contractor said 22 17 44

% Host said 27 10 63

% Agent said 0 0 100

Direct

% Contractor said 17 61 0

% Host said 63 18 10

% Agent said 63 25 0

The results from the interviews disagree with the survey findings indicating

that in a direct relationship the hosts’ and the contractors’ comments suggest

that they are mostly confused, but in the indirect relationship the contractors and

the hosts agreed it was either the contractors or the host who was the employer,

but the agents suggested that it was either the contractor and the agent.

This summary of who the actors felt employed the contractors clearly

underlines the confusion that exists within the CTR, remembering that when the

contractors operate through an entity then they are not employed at all.

Figure 13.0. Direct relationship. Who employs the

contractor?

HOST

AGENT CONTRACTOR

10

25

63

63

0

61

18

0 17


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4.1.3 Sham relationships

Even though there were many actors who appeared confused in relation to

the employment or engagement of a contractor within a CTR, it appears that

some of the actors were perhaps not conveying the full truth as during the

interviews it was observed via nods and winks, and comments from some actors

referring to the other two cohorts, that some of them purposely tried to

circumvent the legislation for financial benefit. It is fair to comment that

shamming could be a deliberate or an incidental act, as some actors may

deliberately organise their CTR to disguise a relationship in order to maximise

their incomes and to minimise their taxation, yet others may be pressured by one

of the other two actors within the relationship to comply.

Shamming or deliberately making attempts to disguise an employment

relationship as investigated by the Sham Contracting Inquiry in December 2010,

stated, “certain conduct in relation to ‘sham arrangements’ is unlawful”


During the interview process one of the academic interviewees explained that he

was aware of a white-collar technical contractor who operated via an entity

earning AUD $1,000 per day and had done so for the last seven years, whilst being

controlled, integrated into the host’s premises, and working for the same host

organisation without financial risk. When the question was put to the academic as

to why the friend was not an employee of the host, the response was, “Why both

parties are happy with the relationship and prefer it that way – this is modern

employment” (Academic, 2015). This could be an example of white-collar

shamming where these white-collar contractors are generally paid well and

minimise their outgoings by paying corporate tax (or if at all) under commercial

arrangements and are therefore unlikely to want to expose their shamming

relationships or want the present system to be changed. This point also surfaced

when the actors were asked if they would prefer a different system to the CTR,

with the majority confirming the negative. When the actors were asked if they


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ever masked their true employment relationship for financial gain, some

responded openly that they did.

Five of the contractors honestly exposed the fact that they were shamming (see

Table 15 and Appendix I Table 60). This behaviour therefore could be in breach of

the employment legislation. One contractor admitted to deliberately being in a

sham relationship but added that he was not avoiding tax and that he was not

doing anything illegal. Another independent contractor commented that he was

masquerading as a business and that he was really like a member of staff.

The hosts were mixed in their comments (see Table 15 and Appendix I

Table 60) suggesting that some contractors could sham, with another commenting

that contractors probably did. One host explained that they tried to distance

themselves from being seen as the employer commenting, “We pay their invoice

and don’t pay their tax but this is the only thing that differentiates them from

our employees, which is grey, very grey”. Another commented, “We do have

people that we treat like employees who are actually engaged as contractors

through a company they own”.

The agents were (see Table 15 and Appendix I Table 60) strongly critical of

the hosts using contractors for shamming purposes, with one agent stating it was

wrong. Another agent had been investigated by the ATO and informed by them

that the relationship that they had arranged with their host and the contractor

could be deemed to be a sham arrangement. Another suggested that it was just a

‘tax dodge’ and that “the lines were blurred”. He also commented, “It was all

about paying less tax”.


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Table 15

Sham arrangements


It was shamming to a certain degree, doing it deliberately, but we were not doing it to avoid tax, we weren't doing anything illegal.

Yea I could see people shamming.

There are employers that do this [engage contractors] for shamming reasons, they use contractors for reasons that are ‘bull…t’, without doubt, and I think it is wrong.

I was an individual

masquerading as a business. The contracts were sort of like the staff negotiated contract type jobs. A contract rate on staff premises sort of job. I feel as though the people in the system sham.

I don’t necessarily

see it as shamming.

The ATO came out

about a year ago and said that [the relationship] can be deemed a sham contracting arrangement. We are deemed as the employer, if they [ATO] deem that a particular independent contractors relationship is a sham contracting arrangement.

This topic was not investigated in the surveys as it was felt that such a

sensitive subject would be better investigated with a face-to-face interview.

The general confusion as to whether the contractors could be classified as

‘shaming’ spilled over into the consequential topics of responsibilities, insurances,

taxation and legislation, as nearly all of the actors, some of whom had engaged

contractors for decades, commented that they were still unsure about the exact

nature of engaging contractors either in a direct or indirect manner.


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4.1.4 Responsibilities

The day-to-day responsibilities of managing the contractors’ output,

correction of errors, managing conflict, and performing inductions were explored

to obtain an indication of the level of involvement by the host or the agent in

managing the contractor. The level of involvement potentially provides an

indication of whether the contractors were performing in a similar manner to

those of employees or if they were genuinely engaged as independent contractors.

Three of the contractors’ qualitative interview responses were contradictory

(see Table 16 and Appendix I Table 61) in relation to who was responsible for

their work-output, day-to-day management, errors, liabilities, inductions and

conflict. One contractor stated that he managed his own output yet the host

integrated and controlled him, and another two contractors confirmed that the

host managed their output. One contractor commented that when he performed

in a direct manner the host was basically his employer and responsible for him.

From the contractors’ perspective when they operated in an indirect manner

they felt much less responsible for most of the features of the relationship

compared to when operating directly. The contractors also indicated that in an

indirect manner that they and their hosts’ were equally responsible for their work

output and their day-to-day management. In a direct relationship however they

felt that the hosts were strongly responsible for the contractors OHS, their errors,

day-to-day management, the engagement process including inductions, and also

for managing conflict.

The hosts’ verbal comments also provided (see Table 16 and Appendix I

Table 61) conflicting findings, with one host admitting that they tried to ‘keep a

distance’ from being seen as the employer of the contractor [to avoid

responsibilities] and that the system was very, very grey. Another supported this

indicating that the system was ‘pretty vague’. Two further comments indicated

that the agents were responsible for the contractor’s liabilities.


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One host added “So the agent employs the Pty Ltd Co – they don’t though

do they: but they should”. Another host added “If they’re here as a contractor

then yes we would accept responsibility; if they’re here as a consultant

absolutely not. Coming through an agency, no, we would not accept

responsibility”.

These comments allude to the fact there are various types of independent

contractors, as per the Figure 7 and Table 1 in Chapter One. The comments from

the actors also indicate that they may not know how to define a true independent

contractor so that they can operate with impunity. Another host commented that

in a direct relationship the host would have more responsibility but they would

not employ the contractors.

Two agents reported (see Table 16 and Appendix I Table 61) that all three

actors had some responsibility for the contractors and two further agents

suggested that it was the contractor’s entity that should be responsible.

Overwhelmingly, eight agent comments suggested that it was the host who should

take responsibility for the contractor’s liabilities as they supervised the

contractors’ in their premises. One agent commented “That the hosts don’t want

to accept responsibility, that’s why they do it through an agent”.


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Table 16

Responsibilities

Contractor Host Agent Academic

When I operate in a direct manner I am basically their employee so I would think that they are responsible for me.

The contractor is responsible for his taxation.

Yea we feel at risk. We feel seriously at risk. The host should be responsible for them.

We would consider the agent to be responsible for the contractor.

For direct or indirect contractors, who is responsible for professional indemnity, public liability, WorkCover, tax? Agent. Um if it’s a PTY LTD they are.

It was stipulated in the contract [that they were responsible for their own mistakes] but it didn’t happen. I don’t think it ever happened as I know a lot of people [contractors] who stuffed up badly and they just got paid to fix it up badly again. … They really should be employees.

This has been a bone of contention for quite some time; we feel that the contractor’s entity is responsible for the contractor. The agent does have a responsibility…it really is just a tax dodge from my perspective.

Who is responsible? [Contractor] Errrrr, I can’t answer that. It’s not us.

The contractor is responsible for the professional indemnity, public liability, WorkCover all those sorts of legal things, taxation.

Our opinion is that we are responsible for the insurances but we don’t employ them. We’ve been forced to do that.


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Table 17 Indicates the statistical responses from all three groups when they

were asked who they thought was responsible for the contractor’s features when

they operated in an indirect and direct manner.

The hosts’ survey findings were consistent with those of the contractors’,

suggesting that they felt just as responsible for the contractors in both the direct

and indirect situations, with only 27% of the hosts indicating a marked reduction

in responsibility for the contractors’ liabilities in an indirect manner. Implying

that the host thought that the agent or the contractor may be more responsible in

the indirect relationship for the contractors’ liabilities. As expected, there were

only 55% of the hosts who said that they were responsible for the employment of

the contractors in either relationship, but 82% said they managed the contractors’

work output and 73% confirmed they managed the contractors’ day-to-day

management.

Interestingly, when the agents engaged the contractors they only felt

strongly responsible for the contractors’ OHS, employment, liabilities, inductions

and managing conflict. They clearly indicated that they did not feel responsible

for the contractors’ day-to-day management, work output or their errors, even

though 88% of the agents indicated that they strongly felt responsible for

employing the contractor.


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Table 17

Survey findings. Responsibilities.


Indirect Direct Indirect Direct Indirect

* entity host host host agency

Work output 50 50 82 82 25

OHS 33 72 91 91 88

Employment 33 61 55 55 88

Day-to-day management

50 50 73 73 13

Contractor errors 39 50 73 73 0

Engagement 27 88 - - -

Contractor liabilities - - 27 45 50

Contractor inductions

22 83 91 91 50

Managing conflict 33 72 82 82 63

* Which actor thought that they were responsible for: -

4.1.5 Insurances

Insuring the contractors’ actions may also be an indication of whether the

actors thought they employed or engaged the contractors. This topic generated

some deep feelings and it was widely discussed during the interviews (see Tables

18 and 62).

It seems reasonable to assume that none of the actors would purchase

expensive insurances if they were not required or forced to do so. An employee,

for example, would not purchase Professional indemnity (P.I.) or Public liability

(P.L.) or WorkCover as their employer would take responsibility for ensuring that

these were purchased to cover any eventuality for his/her employee’s actions.

Witnessing such diverse feedback from all of the actors suggests that none of

them felt confident of the status of the contractor. This implies that one of them

may be deemed the ‘employer’ and therefore be responsible for the purchase of

the insurances, in a similar manner as if the contractor was an employee.


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The contractors described a mixed situation regarding which actor should

provide insurances for them (see Table 18 and Appendix I Table 62). One

contractor explained that in a direct relationship the host would be responsible

for the insurances and in an indirect relationship the agent would be responsible

for them. Another reported that when direct the host would not cover WorkCover

but in an indirect relationship the agent would. The same contractor confirmed

that he purchased public liability insurance but never professional indemnity.

Another confirmed that he did not have WorkCover as he relied upon the agent

for WorkCover. A third contractor stated that he had legal advice confirming that

he did not need to purchase professional indemnity as the host controlled the

work, however, the findings showed clearly that the majority of comments from

both the hosts and the agents suggested that it was the contractor who should be

responsible for purchasing the insurances.

Both actors (host and agent) could be incorrect as these statements may be

explained by assuming that neither the host nor the agent wanted to be seen as

the employer the contractor. One agent tried to put an emphasis on this scenario

by stating “We don’t employ them but we still have to take out insurances for

them”, indicating that there is a level of confusion or self-protection at hand.

One host reported (see Table 18 and Appendix I Table 62) that they were not

concerned who provided the insurances as long as they were in place. The hosts

provided two comments indicating that it was the responsibility of the agents to

provide the insurances with one host stating that it was the hosts who should

provide them. There was a further comment that one host simply did not know

who should provide them.


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Table 18

Insurances


I don’t have to worry about professional indemnity because I’m not a professional engineer.

The agent should provide P.I., P.L., and WorkCover, that’s where it gets messy, don’t quote me on this but “ I don’t know”.

We are responsible for providing them.

I'm not sure who is responsible for my P.I. or WorkCover.

In an indirect relationship. I'm not sure.

We are responsible for the contractor’s P.I., P.L., and WorkCover.

I maintain my own but sometimes the agent will duplicate those P.L. and P.I. for their own assurance.

I would expect the contractor have them. I don’t know. So long as the insurances are in place we don’t mind.

We don’t employ them but we still have to take out insurances for them.

The agent doesn’t provide the insurances.

We are willing provide P.I. for them as this is based on legal advice.

Their entity is responsible to have those relevant insurances in place.

Yes the agent did cover me for insurances.

The contractor is responsible for the insurances.

We expect the contractors to carry their own insurances.

The agents were (see Table 18 and Appendix I Table 62) more confident that

they were responsible for the contractors’ insurances but still verbally reported

conflicting opinions. Some suggested it was the contractors’ responsibility but

there were also two comments suggesting it was the agents’ responsibility.

It may be that the agents also see the situation as being so unclear that they

mitigate the potential risk of being nominated as the employer by providing the

insurances when they may not really need to; perhaps leading to the contractors’

being insured by more than one actor at a time, at reasonable expense.


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Overall the findings from the interviews pointed to the contractor being

responsible for providing the insurances with the agent and the host indicating

that they were also mildly responsible. The interview findings also indicated that

there was confusion as to who is responsible for providing the insurances. For

additional findings in relation to insurances (see Appendix I, Table 62).

The surveys also asked the actors to indicate if they insured the contractors.

The collated survey findings are presented in Table 19. In an indirect relationship,

the survey findings from both the contractors and the agents indicate that the

agent is nominated as the actor who should provide public liability, professional

indemnity and WorkCover for the contractors. Only 18% of the hosts indicated

that they should provide public liability and professional indemnity, and even less

at 9% responded that they should provide WorkCover for the contractors even

when they operated in their premises.

In a direct relationship the emphasis to provide insurances has moved to the

contractor with more than 50% of them agreeing that they should provide their

own insurances. Surprisingly, 47% of the contractors also felt that the host had a

responsibility to provide insurances. Overall the survey findings show that in an

indirect relationship the agent was seen as responsible for providing insurances,

but in a direct relationship the contractors were not sure whether the hosts or

themselves were responsible for the insurances, with only a few of the hosts

responding that they too might have a small responsibility for providing insurances.

The interview findings were generally confirmed by the survey outcomes

with each group of actors suggesting one of the other two was responsible for

purchasing the relevant insurances to cover the contractors’ actions and liabilities.


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Table 19

Survey findings. Insurances


Insurances Contractor Host Agent Host Agent

Indirect

Public Liability 35 12 53 18 75

Prof. Indemnity 35 6 59 18 75

WorkCover 41 0 59 9 88

Direct

Public Liability 53 47 0 18 -

Prof. Indemnity 53 47 0 27 -

WorkCover 59 41 0 18 -

4.1.6 Taxation General

The three actors were specifically asked who was responsible for the

contractor’s taxation as the responsibility for collecting employment taxes could

provide an indication as to whether the contractor was being treated as an

employee and by whom. Adding this piece of information to the overall picture of

the actors’ relationships is important to this thesis as the financial penalties

associated with not being employed properly deliberately or innocently generates

an element of financial risk for the actors.

The contractors reported (see Table 20 and Appendix I Table 63) that they

were always worried that the ATO would investigate them. One contractor felt

‘lucky’ as he had been with one host for five years without the ATO ‘looking at

him’. During one interview a wife of a contractor explained that they could use

their neighbour as a ghost employee to get around the legislation suggesting also

that they would be stupid not to take advantage of the situation.


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Table 20

General taxation


I was lucky over the last five years as I had constant employment with one host, and the

tax department did not look at us.

If they [tax office] did a solid audit they most likely

come up to us and say we have some contractors that should have been employees.

And the employees could not get the same benefits and so they’re [contractors]

doing it in fact to avoid tax, and I don’t think the authorities have the strength to do anything about it.

But you were always worried that the tax department was going to look too hard and you’d be dead in the water; they may well say you should have been taxed as an employee of the host.

We pay payroll tax on the contractor but he pays his own tax, well I don’t know if we withhold tax from his company but I do know he invoices

accounts payable.

It’s just a tax dodge from my perspective. We pay payroll tax on every single person who is deemed an employee including Pty Ltd entities as we recognise them as employees.

Who looks after your taxation? [contractor] Myself: So the agent doesn’t do your tax? [contractor] . No.


The hosts supported the fact that the topic of taxation was the responsibility

of the contractor but one host confirmed that if the ATO performed an audit (see

Table 20 and Appendix I Table 63) then they would deem the host as the

employer of the contractors. This hosts comment implies that he was fully aware

of the legislation. Interestingly, the survey findings (see Table 21) disproved this

with only 18% of the hosts’, indicating that they did not feel strongly responsible

for the contractors’ general taxation when the contractors operated in a direct


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manner and only 9% in an indirect manner. Another host was unclear of their

obligations in relation to how the tax system operated in relation to contractors.

The agents reported (see Table 20 and Appendix I Table 63) that for the

contractors ‘it was just a tax dodge’, and that the authorities did not have the

strength to do anything about it. Another agent commented that the contractors

were flouting the professional services rules and doing ‘income splitting with the

misses’.

The survey findings revealed that when the contractor operated in an

indirect manner then the responsibility for collecting the contractors’ tax was

split between the agent and the contractor, with both suggesting that they would

withhold Pay-As-You-Go (PAYG) taxation i.e. that of an employee. The

contractors‘ strongly felt that they were responsible for their own tax when they

operated in a direct manner but not so strongly when they were engaged via the

agent in an indirect manner.

The agents responded more strongly to collecting GST and payroll tax, but

not for superannuation. In a direct relationship, the findings showed that the

contractors’ entity took responsibility for its own PAYG tax, GST, payroll tax and

superannuation. This implies that the host would make gross payments to the

contractor’s entity that would administer its own finances. Unfortunately, all

three groups of actors recorded paying PAYG taxation, which implies employment.

The findings also indicated that payroll tax would be the responsibility of the

contractor in a direct relationship and the agent in an indirect relationship. As the

threshold for contributing payroll tax in Queensland is approximately AUD $1

million then it is suggested that the contractors’ comments in relation to payroll

tax are confused.

The survey findings also indicated that the hosts felt that they were only

marginally responsible for the contractor’s general taxation.


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Table 21

Survey findings. Taxation



PAYG tax 50 83 9 18 38

GST tax 38 89 9 18 63

Payroll tax 33 61 9 18 50

Superannuation 50 78 9 18 25

4.1.7 Alienation of Personal Services Income Act 2000, (80% rule, or 80/20 rule)

In an attempt to avoid contractors being designated as employees incorrectly

the ATO introduced The Alienation of Personal Services Income Act 2000. This is

generally referred to as 80% rule or the 80/20 rule (ATO, 2017) and can be applied

to check if a contractor is a legitimate business for taxation purposes. The 80/20

rule indicates that a contractor should not earn more than 80% of its annual

income from one source. As outlined above the author felt that prosecuting this

topic would provide additional information to assist in the understanding of the

relationships within the CTR. Consequently, the actors were asked if the

contractors’ were able to comply with this legislation when they were working on

long contracts.

The survey findings indicate generally that the 73% of the hosts and the 63%

of the agents felt that they contractors did comply with the 80/20 rule on long

contracts but only 28% of the contractors agreed with this.

The interviews unearthed some interesting findings (see Table 22) with some

contractors explaining methods that they practised to circumvent the 80/20 rule

when their sole contracts were longer than 80% of the year and thus would result

in them breaching the rule and potentially being deemed employees for taxation

purposes. Some of the actors commented generally that some of the methods of

avoiding taxation were not illegal but perhaps entrepreneurial.


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Table 22

80/20 rule.


The other way that we could get around it [by income splitting] was instead of paying me [wife of contractor] a personal wage was to get the

neighbour down the road to do all the banking, bookwork, paperwork, all his tax, everything that I did. Husband contractor; To be dishonest.

We have contractors who have been here for 18 years, so tell me that the 80/20 doesn’t apply to them if they work 40 hours per week for 10 years with

us? (Rhetorically).

I can’t for the life of me understand how the independent contractors somehow managed to bluff the ATO

and the 80-20 rule.

Contractor’s wife; Then he [contractor] could supposedly pay the neighbour and that was the way around it.

If someone is contracting long-term then it is usually a worry for them on tax, like the 80/20.

Most of my Pty ltd contractors are flouting the professional services and the 80/20 rule.

And I’ve heard, I

don’t know for a fact, that a lot of contractors did that. contractor: Have a ghost employee.

Yes we are aware of

it.

The 80/20 rule is

not my concern.

The contractors reported (see Table 22 and Appendix I Table 64) that the

80/20 rule was an issue and ‘was always a worry’, especially for longer-term

contracts. Consequently, the contractors reported that to comply they made

some modifications to their contracts by either ‘folding other services’ into their

entities or by ‘swapping hosts’ with other long-term contractors or by ‘changing

agents’ but staying with the same host. One contractor commented that his

accountant ‘sorted it’ as the accountant was ‘a good bloke’. Another contractor

commented that he simply did not know if he had to self-asses. Yet another


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explained that to get round the 80/20 rule they would be dishonest and employ a

ghost employee.

One host confirmed that (see Table 22 and Appendix I Table 64) they did

have a long-term contractor who had been with their organisation for longer than

18 years. The host asked the rhetorical question “Tell me that it [80/20 rule]

doesn’t apply to him?” Other hosts were aware of the rule and added that it was

a worry for the contractors.

One agent reported (see Table 22 and Appendix I Table 64) that most of his

contractors were flouting the 80/20 rule and that there was a lot of confusion

about it from the contractors’ perspective. Another agent openly commented that

they were involved in any duplicity with some of the contractors and that they did

not understand how the contractors were getting away with it, but the 80/20 rule

was not their (the agent’s) concern. These verbal comments do not support the

survey findings, which indicated that 63% of the agents felt that the contractors

did comply with the 80/20 rule.

4.1.8 Confusion – legislation.

As confusion was being raised by many of the actors it has been split into

two sections, the first exploring confusion in relation to the current Australian

legislation and secondly confusion was explored more generally with a focus on

employment (or engagement) relationships.

The hosts’ interview findings (see Table 23) in relation to the governing

legislation supported the fact that the CTR was confusing. One host commented

that it was messy, with no real clear way of dealing with it, which is in contrast to

the general survey findings. One host commented that the system was confused

and that the system needed clarity. Another commented that he was not sure who

provided insurances, while another added that it gets difficult to distinguish and

that there is no real clear way of dealing with contractors’, stating that “It is

confusing”.


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The agents whose survey findings confirmed that they were the most

confused, also verbally confirmed that the ‘whole thing’ was confusing. Another

long-term agent was unable to answer some questions and appeared embarrassed

that he was still confused after being in the business for a long time (see Table 23

and Appendix I Table 65). He simply repeated that the system was grey. Another

agent also stated that the system was not well understood and another agent

confirmed that he used the tactic of taxing contractors as employees to mitigate

his risk profile. This agent explained that this was understandable as his “biggest

areas of confusion are superannuation, tax, workplace health and safety,

liabilities; the whole thing”.

Again, the survey findings from the contractors echoed their interview

findings showing that they do not fully understand the 80/20 taxation legislation

or their contractual conditions, with one contractor confirming that the

contractors’ were confused in relation to superannuation, tax, OHS, and ‘the

whole thing”. The contractors reported (see Table 23 and Appendix I Table 65)

openly that they were not confident with the present legislation. One contractor

stated that until the ATO tells him otherwise he would not do anything differently.

Two contractors informed the author that neither had been given any advice as to

how to be a contractor. Only one contractor stated that he had not experienced

any confusion.

This confused scenario in relation to the current legislation is not surprising

as the pace of change to the non-standard work relationships within Australia.

The pace of change when combined with labour market deregulation since the

1980s has resulted in “a highly porous, opaque regulatory system which has

become more blurred and riddled with gaps” (Campbell et al., 2004, p. 132)

making it difficult for legislators and the actors of the CTR to keep pace and

abreast of the changes.


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Table 23

Legislation


I think there is a lot of confusion from the contractors’ perspective relating to 80/20 taxation legislation.

The system is confused. Are we happy or just naïve? I think it does need clarity, yeah. In terms of insurances it gets messy.

No, no the system is not well understood. There’s a lot of host employers out there that just don’t understand how all this works.

The biggest areas of confusion are superannuation, tax workplace health and safety, liabilities, the whole thing.

There’s no real clear way of dealing with this CTR. It is confusing. I think the line has become blurred.

He was very confused about the CTR. He was unable to answer some question, repeating that the subject was

grey and confusing. He was very confused about the tripartite relationship, which was really surprising as he has been in the business for 23 years.

It would have been easier if that grey area were allowed to be grey.

The survey findings are presented in Table 24 and indicate that the agents

found most topics more confusing than the contractors or the hosts, except for

the topic of taxation. Similarly, the findings from the contractors’ comments also

indicate a strong level of confusion across all topics. Interestingly, the survey

findings recorded that 53% of the contractors said they were confused in relation

to insurance even though they were nominated to be most responsible for

insurances in Table 24. The survey findings also indicated that 59% of the

contractors were confused with taxation, 53% with the contractual conditions,

and 47% with employment laws.


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The survey findings from the perspective of the agents indicated that 88% of

them found contractual conditions confusing, 75% found employment laws

strongly confusing, and 50% indicated that the insurance legislation was also

confusing. Only 38% of the agents felt that taxation was confusing. The confusion

experienced by the agents on all topics suggests that they are servicing both the

host and the contractors without fully understanding their contractual conditions,

the employment laws that relate to hiring independent contractors, or whether

they should be providing insurances for the contractors. It also suggests that the

contractors are going to work in the hosts’ premises in a confused manner as the

agents are not in a position to effectively pass on the to the contractors the

correct requirements in relation to their taxation, insurances, and/or contractual

conditions. The hosts only seemed to understand the present legislation that

applies to contractors a little more than the other two cohorts. Sixty-three per

cent of the hosts confirmed that taxation legislation; insurance, employment laws

and contractual conditions were confusing. Intriguingly, as shamming is a

deliberate act this statement suggests that within the 37% ‘remainder of the

host’s cohort’ some actors would be knowledgeable enough to be able to take

advantage of the legislation and deliberately sham.

Table 24

Survey findings. Legislation


Taxation 59 27 38

Insurances 53 18 50

Employment laws 47 36 75

Contractual conditions 53 36 88

4.1.9 Confusion – general.

The following three tables are provided to highlight comments from each of

the three cohorts to show the level of confusion that exists within the CTR outside

of legislation and generally in relation to their employment or engagement. Only


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five comments have been selected here from each cohort, although many more

exist and can be seen in in Appendix I, (see Table 65).

Some contractors stated more than once that the system was grey and that

they did not have any financial risks (unlike true independent contractors or

consultants) and that they were treated as employees even though they traded

through entities. However, some contractors accepted that there was an element

of financial risk operating as a contractor in a CTR (the interview comments were

stronger here than the survey findings) and they clearly feared that they could be

‘found out’ by the ATO and deemed to be employees of the host or the agent and

penalised accordingly. The contractors stated that ‘stupid’ government policies

have allowed them to operate as contractors and that they too would be stupid

not to take advantage of the situation. A number of incorporated contractors also

confirmed that the host was their employer indicating a complete lack of

understanding of their employment status. Another contractor commented that it

was not the host but the agent who was their employer. This again shows a lack

of understanding as the contractors traded through entities and neither the hosts

nor the agents are their employers. Yet another contractor stated, “the

[contractual] paperwork might have said that the agent employed me but for all

purposes the client employed me”. Another just stated that “it was a hot potato”.

One contractor expressed that he was forced by the host to incorporate and

operate through an entity to mitigate the employment risk to that host. Yet other

hosts’ were either ignorant of the legislation or not in fear of it, as it was seen

that some contractors were engaged on behavioural contracts and were able to

stay with their hosts for many years; resembling the relationship of employees. In

spite of the fact that the contractors were not supposed to resemble employees

of the hosts, the hosts’ commented that they treated the contractors like

employees and consequently felt at serious risk of being penalised. One host

responded to the question, “Do you employ them?” with “Yes and no!” and that

“It is a very, very grey area.” He further explained that he needed to know what


133

the legal definition of employment was. Table 25 displays the cohort responses

indicating general confusion.

Table 25

Confusion


I know it’s a grey area.

It is a very, very grey area.

It's grey; it’s difficult for a judge to decide who the employer is.

Even though I had a Pty Ltd Company, the host was the employer.

For those contractors who have been with us for longer periods, then this risk of contractors being employees has a potential to be a big thing.

Yes we feel at risk. They really should be employees.

The contractors do not carry any financial

risk.

Yes we feel at risk, we feel at serious risk.

No, no the system is not well

understood.

Ok. Ahmm. The paper-work might have said that the agent employed me but for all purposes the client employed me.

The system is confused; I think it does need clarity, yeah.

Well their entity does employ them, but we consider them an employee

Right now it is getting a bit confused. I would say it is the host who employs me

even though I have an entity.

Do we employ him? Yes and no. Can I say that? Grey. Very, very grey area.

After a period of time that contractors’ became employees

of the host as they “looked like employees of the host”.

It’s not very clear; there is a lot of grey, I think the line has become blurred.


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Other hosts added that it was difficult to distinguish [between engagement

and employment], and that it was confusing with no clear way of dealing with the

topic. Another host confirmed that he tried to distance his organisation from

being seen as the employer of the contractors but added that in reality it didn’t

work. Another host asked for clarity, and another confirmed that he had

continuously engaged one contractor for 18 years. This same host admitted that it

was a grey area but then added that it might be better if the legislation

pertaining to the CTR were allowed to be grey so that he could continue ‘as is’

but without the risk of being fined for unknowingly being in breach of the

employment legislation. Table 25 displays the hosts’ responses that indicate

confusion. Additional comments can be seen in Appendix I (see Table 65).

Clearly some hosts were more cognisant of the true situation than others, as

some tried to hide the fact that the contractors could be seen to be their

employees. The hosts wanted the flexibility of hiring and firing the contractors

and a method of reducing their overheads, but agreed that they were taking a risk

and hoped that they would not be exposed and penalised. Other hosts admitted a

number of times to being confused. As a result of some of the agents using both

types of contractors, i.e. those who were engaged in an on-hire tripartite

relationship and those who were engaged in a CTR. The agents appeared to

confuse the legislation that applies to both categories.

On a number of occasions the agents stated that they were the employers of

the contractors even when the contractors were operating through their own

entities. One agent added that after 12 months “the entity contractors become

employees of the host as they ‘looked’ like employees of the host”. This shows a

clear lack of understanding of the CTR and a general confusion of the topic.

Further, one agent who had been operating in the Brisbane market for 23 years

added that he was still very confused. A number of agents also confirmed that

they were confused and that the situation was grey and further that they felt at


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risk, with one agent confirming “it was difficult for a judge to decide who the

employer was”. Such confusion has led some of the agents to treat the

contractors as employees in order to mitigate their potential risks should the ATO

ever investigate them. This has further resulted in some contractors’ thinking that

they were engaged using their entity but behind the scenes the agents were

taxing them as employees. Table 25 displays the agents’ responses that indicate

confusion in relation to employment or engagement. A fuller list can be seen in

Appendix I (see Table 65).

4.1.10 Summary of the wider contextual data

Reviewing the wider contextual data has provided a broad insight into the

CTR, highlighting why the actors are involved with a CTR, where the contractors

perform their work, which actor provides insurances, how long (on average) the

contracts last, and which of the actors felt that they were responsible for the

contractors’ output. The following table (see Table 26) summarises the ‘wider

qualitative contextual data’ and highlights the differences of opinions from each

of the actors clearly showing that the reasons to engage in a CTR are different for

each cohort. The contractors were looking for remuneration, flexibility and life-

style, yet the hosts were mainly interested in reducing their overheads whilst

maintaining a flexibility that allows them to hire and fire without breaching the

current employment legislation or being sued for wrongful dismissal. The agents

simply wanted to earn a profit.

All three cohorts showed differences in whom they thought employed (or

engaged) the contractors and to what level of responsibility they thought they

had towards the other actors. In a direct relationship, there was doubt as to

whether the host or the contractor’s entity employed the contractor. In an

indirect relationship it was strongly felt that the agent employed the contractor,

even where the contractor was using an entity to trade through. The actors were

also mixed in their interpretation of their responsibilities, as the contractors felt

that they only had limited responsibilities in the indirect relationship compared to


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their direct relationship where they thought the hosts adopted the responsibilities

for their actions. Interestingly, the hosts’ seemed to accept most of the

responsibilities in both the direct and indirect relationships but the agents still

felt responsible for employment and conflict resolution, and as noted in the

previous paragraph the agent strongly felt as though they did employ the

contractors in an indirect relationship, yet the hosts’ thought that they were

responsible for the contractors in this situation.

The wider contextual topic discussions also highlighted unforeseen and

mixed responses in relation to taxation. When there was a direct relationship, the

contractors’ commented that they were responsible for all taxation requirements;

this was supported by the hosts’ who stated that they did not collect tax, but

neither comment here is accurate if the direct contractor is deemed to be an

employee of the host. The agents’ also commented that in a direct relationship

they only collected GST, even though they were not involved with a direct

relationship. Interestingly, the survey findings indicated that 38% of the agents

reported that they collected PAYG (employee) taxation from the entities invoice.

Clearly there is confusion here, as the hosts and the agents are required to

withhold GST taxation from the entities invoices, as the entities should be

operating as businesses. The subject of GST was seen as really confused. Table 26

provides a précis of the above wider contextual findings.


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Table 26

Wider contextual data

Wider contextual data


Reason to contract.

Remuneration, flexibility, lifestyle.

Flexibility and reduced overheads.

Profit.

Who employs the contractor?

Direct host, indirect unsure.

Indirect not agent, direct entity.

Indirect 100% agent, direct entity.

What are your responsibilities?

Limited. Indirect and direct; work output, safety, inductions, management, errors, conflict.

Safety, employment, conflict.

Are you responsible for collecting taxation?

Direct. PAYG, GST, Payroll tax, superannuation.

Strongly not GST.

Are you at financial risk?

No. No and yes. Not.

Do you comply 80/20?

No. No. Yes.

Do you provide insurances?

- Only when direct.

Yes, P.L., P.I., WorkCover.

Are your expectations met?

Met. Met.

Engagement Direct, mainly behavioural based.

Behavioural and outcome- based.

Behavioural and outcome- based.

Who do your goals align with?

Host Contractor, agent.

Host, contractor.

Where is power? With host. With host. No one.

Power moves towards?

Entity. Host. Host, contractor

Where is your loyalty?

With host. With host. To all three.

Loyalty moves towards?

Host and agent. Host. Host.

Opinion on legislation?

Confused. Confused. Confused.

Opinion in joint employment?

Unattractive. Unattractive. Unattractive.


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The general uncertainty as to who should provide insurances or which actor

is responsible for collecting taxes, or if the contractor complies with the 80/20

rule, or which actor might employ the contractors confirms that the CTR requires

clarity and further inspection. Consequently, Chapter Five will continue to

investigate the CTR through the theoretical lenses of agency theory (Eisenhardt,

1989), psychological contract theory (Guest, 2004), and the theory of power

(Ranjan & Zingales, 1997).


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CHAPTER FIVE

The overall purpose of the research is to explore the CTR for themes and

topics that might provide a clear insight into the detailed working of the

relationship and respective responsibilities for all actors within the relationship.

Chapter Four presented the wider contextual findings of the CTR which indicated

that the actors were generally confused about how to effectively navigate the

legal and social constructions of the relationship. This chapter will continue to

investigate and discuss the CTR using the theoretical lenses of agency theory

(Eisenhardt, 1989), psychological contract theory (Guest, 2004), and the theory of

power (Ranjan & Zingales, 1997).

5.0 STRUCTURE OF CHAPTER FIVE

The data and the findings that surfaced as a result of the qualitative

interview and survey studies demonstrated that the three theoretical lenses

applied to this research, agency theory (Eisenhardt, 1989), psychological contract

theory (Guest, 2004) and the theory of power (Ranjan & Zingales, 1997), all

partially contributed to a deeper, but not a full, understanding of the CTR. The

detailed discussions of the theories and their application to the CTR will be

presented under the headings of the theories. Firstly, agency theory and its

analysis will be presented in the following order, asymmetrical information, goal

alignment, outcome uncertainty, financial risk, incentives, agency theory

summary. Secondly, the detailed discussions in relation to psychological contract

theory will be presented in the following order, loyalty, internal pressure,

external pressure, and mutual obligations. Thirdly, the theory of power will be

presented in the following order, supervision and power, change of power over

time, and conflict. The chapter will conclude with a summary of the above topics.

5.1 AGENCY THEORY FINDINGS

The four aspects of agency theory that were inspected were asymmetric

information, opportunistic behaviour, goal alignment, and risk. By definition,

agency theory (Eisenhardt, 1989) suggests that the agent has a level of

independence from the principal and may therefore operate opportunistically in


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its own self-interest. Further, where the agent has relevant information about its

services that the principal does not have, then there will be an additional moral

hazard due to asymmetrical information. Depending on the scale of these moral

hazards and the actors’ levels of discomfort with the level of risk that these moral

hazards present, then the principal may take action to mitigate these risks by

expending monitoring costs to monitor the agents’ (contractors and agents)

behaviour or provide incentives i.e., good rates or bonuses, to encourage the

agents to align their goals with those of the principal’s organisation.

The three groups of actors were asked to comment if they felt that the other

two actors were withholding information from them during their engagement

related interview processes. To confirm this, the reverse question was also put to

all three actors asking if they ever withheld information from the other two actors

during their engagement related interview processes (see Table 27).

5.1.1 Asymmetric information

Table 27

Survey findings. Asymmetrical information

Did you withhold information at the interview?

Was information withheld from you at the interview?

*Agent→ host NO YES

Host → agent NO YES

Host →contractor NO YES

Contractor → host NO YES

Contractor →agent NO YES

Agent → contractor NO YES

*When an actor asks another actor a question this is indicated by an arrow from the asking actor. I.e. contractor → host, or host → contractor etc.

Interestingly, the survey findings clearly and unanimously revealed that all

six relational responses were contradictory. The outcomes indicate that even

though all of the actors claimed to be divulging everything to the enquirer, all


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three groups of actors believed that information was being withheld from them

during the interview processes.

Even though information was withheld and a moral hazard could potentially

be expected, the actors did not see this as a problem with some hosts’ reporting

that it was ”not a big deal” and “we employ people who are known to us and are

known quantities”. The implication being that they did not really need the full

information from the agents, as the hosts could always get the information they

needed either from the contractor at the hosts’ interview or when the contractor

started work. In a very similar manner to the way an employee is recruited and

inducted into a new position with a new employer. Another host commented that

it ‘wasn’t the end of the world’.

The contractors’ reported (see Table 27 and Appendix I Table 66), with six

comments, that they never withheld information from the hosts or the agent. One

contractor commented that his Curriculum Vitae was his ‘life’ and that his future

relied upon not withholding information, even so, the other two cohorts thought

that he was still withholding information. There was one contractor who admitted

to a slight deviation to this honesty stating, “We give them what they want to

hear”. Interestingly, there were four contractor comments confirming that they

did not receive all the information they needed from the hosts or the agents to be

able to start work efficiently. With one contractor confirming, “when you get

there [to work] you’d bump into it”, and another commenting that the hosts

would ‘under-talk’ the difficulties with the roles.

The data emanating from the interviews with the hosts reported (see Table

28 and Appendix I Table 66) in three comments that some agents would not pass

on their (the host’s) information to the contractor and also that some agents

would hold back information about the contractor from the hosts. There were two

host comments confirming that they did not withhold information.


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Table 28

Asymmetrical information


I did not withhold

anything.

The agency can hold

back information, they do yeah.

Our agency does

not withhold information but the contractors are marvellous at hiding information: you have got no hope.

I did not withhold

information but the host and the agent did.

We have never

withheld information, but deep down I think that some agents deliberately withhold information from us.

Oh yes, the client

can withhold information about the job.

I never withheld

information, but the agents and the hosts don’t tell you everything at the beginning.

I agree that some

agents may not [pass on all the information to the contractors].

Of course some

contractors do not tell you all the information that they could.

The agents reported (see Table 28 and Appendix I Table 66) in three

comments that they did not withhold information either, with one agent adding

‘unless there is sensitive information’. The agents also provided five comments

confirming that the contractors would withhold information. One agent stated

that the contractors were ‘marvellous at hiding information’ and that “one just

blatantly lied about his qualifications”. Another agent commented that the hosts

too could withhold information from them to make the opportunity more

attractive. The same agent commented that the contractors could withhold

information from them depending on how desperate the contractors were for a

job. Unfortunately, all of the actors felt that everyone else was withholding

information and thus increasing all of the actors’ risk profiles and therefore

increasing their monitoring costs so that the other two didn’t act in their own

interests (Eisenhardt, 1989).


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5.1.2 Goal alignment

The survey findings in relation to the topic of goal alignment indicate that

there is general and mutual goal alignment (see Figure 14, and Table 29). The

results demonstrate that 92% of the hosts’ goals align with the goals of the

contractors, and similarly 94% of the

contractors’ goals were inline with

those of the hosts. All of the agents

indicated that their goals aligned with

those of the host. The only exception

noted was where 29% of the contractors

reported that their goals were in line

with those of the agents yet (in reverse)

88% of the agents said their goals were

in line with those of the contractors. Interestingly, all three actors within the CTR

seem to share a common goal which implies that the actors are acting in concert

in much the same way an employer/employee relationship would be expected to

operate.

Table 29

Survey findings. Goal alignment


Contractor - 94 29

Host 92 - 73

Agent 88 100 -

Were your goals in line with those of the other actors?

However, the earlier interview results had shown contrary outcomes to the survey

findings, as the contractors provided conflicting verbal comments during their

interviews in relation to the alignment of their goals with the other two actors (see

Table 30). One contractor stated that his goal was basically to be profitable. Another

contractor was confused about the goals of the host, as he thought that they were the

terms of his contract that were issued to him via the agent. In an attempt to be seen

Figure 14.0. Agency theory. Goal alignment.

HOST

AGENT CONTRACTOR

73

100

88

92

29

94

0

0 0


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as independent, one contractor explained that if he were informed of the goals of one

of the other actors then he would reject them on principle.

The hosts verbally reported (see Table 30) with a much more negative tone,

indicating strongly that the goals of the three groups of actors would not align.

Yet the survey findings suggested the opposite, with as much as 100% goal

alignment between the host and the agent, and 94% goal alignment between the

host and the contractor. There was only one verbal comment confirming that the

hosts’ goals would align with the other actors’ goals. One host commented

optimistically that the goals of the three actors would align, but then added that

in reality they probably would not. Another host explained that they would use

their on-boarding process to inform the contractor of their goals, but what he was

describing was the hosts’ contractual expectations. The agents also provided

mixed verbal responses in relation to the alignment of the goals of the three

groups (see Table 30). There were the same numbers of comments confirming and

refuting whether the goals of the groups would align.

When the topic of goal alignment was discussed with the three actors it was

received with skepticism with some actors clearly misunderstanding why it might

be important to align their goals with the other actors. All three groups seemed to

be more interested in their own goals or self-interests even though the survey

findings are contra to this overview. The study performed by Nyberg, Fulmer,

Gerhart and Carpenter in 2010 clearly demonstrated that if goal alignment is

achieved between a principal and an agent then a significant and economically

meaningful relationship can be achieved. Nyberg et al., (2010 p. 1041) findings

highlight that the hosts should try to align the goals of the contractors as this

would potentially improve the performance of the hosts’ business and the returns

to the contractor.


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Table 30

Goal alignment


Our goals, I mean my Pty Ltd Co.’s goal is basically just to be profitable.

In reality the answer is probably no. I don’t think that a contractor joining us through an agency would want to help us achieve our goal.

As a means to an end

they will get aligned,

but I don’t think they

will align.

Yes my goals align with those of the agent and the host.

Shouldn’t think so, I mean the agency’s goal is about making money, ours isn’t.

Yes our goals align

across the board.

No, my goals and the agent’s goals do not align. No, never. The host tried to align me into their thinking but I rejected that because I wanted to be a contractor.

I doubt that the contractors have goals with the agents, but we do set goals for them. Yes we will be aligned with both the agent and the contractor.

I don’t think they get

aligned.

5.1.3 Outcome uncertainty

The survey posited a simple question (see Table 31) in relation to outcome

uncertainty to check if the three cohorts knew when they engaged a contractor

whether it was for a specific purpose or whether it was just to have a contractor

available on an ongoing basis.

Table 31

Survey findings. Outcome uncertainty (risk)

Engagement* Behavioural % Outcome %

Contractor 94 58

Host 64 81

Agent 88 88

*The actors were asked if the contractors were engaged to provide a result or to do what was

necessary.


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Clearly the contractors (94% of them) indicated that they were engaged on a

behavioural basis, to be on-hand and to do whatever was required until the work

expired. Eighty-eight percent of the agents and 64% of the hosts also supported

this, but then contradicted themselves with 88% of the agents and 81% of the

hosts also confirming the opposite to be true suggesting that the contractors were

engaged to provide an outcome. The size of this discrepancy to such a simple

question suggests that the actors could have misrepresented the term ‘to provide

a result’ to perhaps mean ‘conclude a piece of work’ rather than provide a result

as a consequence of a consulting experience.

Interestingly, it was reported during the qualitative interviews by four

contractors that (see Table 32 and Appendix I Table 67) they were ‘just kept

going’ on an hourly basis and for long periods, with one contractor commenting

that he was always engaged on an hourly basis. Another contractor stated that he

was with one host for five years and just stepped from project to project. These

six comments suggest that from the contractors’ perspective they resemble being

employees, but being remunerated differently. Only two agents offered

comments (see Table 32 and Appendix I Table 67) broadly suggesting that it was a

mixed scenario and that it depended upon the hosts’ projects whether the

contractors were engaged on a behavioural basis or an outcome basis. The hosts

commented more fully that the contractors were engaged (see Table 32 and

Appendix I Table 67) not only to complete a task but also at times to be

integrated for general work which would result in them being engaged for long

periods. One host added that the contractors could end up being in their premises

for quite a period of time. Another host stated that some contractors could be

engaged to complete an objective and others for on-going contract work.


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Table 32

Outcome uncertainty (risk)


No I have never taken on a job to produce a result for a fee at the risk of losing my job.

Normally the purpose of getting an independent contractor would be to do a set piece of work. I’m sure sometimes it falls into more general work. So they could be here for 24 months.

My contracts are all different. For instance a design engineer might be specifically there to complete a design and even sign it off. But others might be for ongoing support or supervision or anything.

They kept me going by the hour until

they did not need me anymore. All these years I have always been on an hourly basis.

Some independent contractors are

engaged to complete a specific scope of work; others are integrated more into a project team.

It’s all objective based.

I was at one host for 5 years and I just stepped from one project to the next.

They come to perform and complete an objective, and they also can come here on an on-going contract basis to work and stay there for as long it takes.

Depends on what the actual project is. They [contractors] work on specific designs. Once they get to the end of that [project] other projects may come in.

Overall, the three cohorts verbalised a picture that suggested that the

contractors were engaged on an hourly, on-going basis under the direction and

control of the host. These behavioural-based contracts with smaller objectives

built into them reduce the risk profile and outcome uncertainty for the hosts as

they can monitor the contractors’ performance at regular intervals, in a similar

manner as they would for an employee. These longer contracts also allow the host

and the agent to get to know the contractor more fully, thus further reducing


148

their risk profiles by reducing the potential moral hazard due to asymmetric

information and goal misalignment.

5.1.4 Financial Risk

Being at financial risk is another simple determinant as to whether a

contractor may be deemed an employee. Consequently, all of the actors were

asked during the interviews and through the survey if they felt that the

contractors and/or the hosts were at financial risk when fulfilling a contract. The

contractors reported (see Table 33 and Appendix I Table 68) unanimously that

they thought they were not at financial risk when operating in the hosts’ premises,

and that they would not even be responsible for their own mistakes as the hosts’

engineers or supervisors would provide technical direction and therefore be

responsible for their errors.

From the hosts’ perspective having the contractors under close supervision

enables them to easily monitor the contractors’ performance, thus reducing the

hosts’ risk profile and moral hazard. It also minimises the hosts’ monitoring costs.

However, supervising and controlling the contractors in the hosts’ premises only

strengthens a potential claim that the contractors could be deemed employees of

the host. If this were the case then agency theory would not be applicable, as the

contractors would not have the ability to operate independently or in their own

interests.

The agents reported (see Table 33) that they felt at serious risk. But only

one agent confirmed that they did not accept any liability for the actions of the

contractors when they were under supervision and control of the host. Whilst

another agent commented that the hosts should be responsible for the

contractors.

The above comments are accurately reported however, the author was

cognisant that each group of actors would state that they were not at financial

risk as this is what they have understood to be true for some time. The premise,

of course, may not be accurate. Nilakant and Hayagreeva (1994) suggested that


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where there is confusion in regards to who is responsible for the outcomes in a

relationship, hence risk, then generalisability of agency theory may be limited.

Given the confusion that has been demonstrated in the CTR, the contribution of

agency theory to explaining the relationship of the actors is potentially inaccurate

and the analysis may be flawed.

The agents’ reported (see Table 33 and Appendix I Table 68) that they felt

at serious risk, but one agent confirmed that they did not accept any liability for

the actions of the ‘temporary workers’ when they were under supervision and

control by the host. Whilst another commented that the host should be

responsible for them (the contractors).

Table 33

Financial risk


I was never at financial risk, I could have become [at risk], if they had pushed the letter of the law, but it never happened.

No, the independent and dependent contractors do not have risk here.

We are at risk here for the contractor. It is grey.

I would be paid extra hours to fix up my own mistakes. So I did not have a financial risk.

For those contractors who have been with us for longer periods, then this risk of contractors being

employees has a potential to be a big thing.

We don’t accept any liability for the action of the temporary worker when they are under supervision and

control of the host employer.

I know it’s a grey area. The contractors do not carry any financial risk.

Do we take on that risk? We probably do. They usually extend their contract to get the piece of work done. So the benefit is to the contractor.



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The survey findings (see Table 34) supported the interview outcomes,

indicating that only 9% of the hosts’ felt that they were at financial risk when

they engaged contractors in their offices for long periods, and only 12% of the

agents’ felt that the contractors were at financial risk. Although, 33% of the

contractors’ stated that they were unsure.

Table 34

Survey findings. Financial risk


At financial risk 17** 9* 12**

** Are contractors at financial risk? * Is the host at financial risk?

5.1.5 Incentives

A further investigation into whether the contractors were performing as

employees was made by asking the actors if incentives were offered. Offering

incentives would normally indicate that the principal was expending costs to align

the goals of the agent and therefore using this as a method of monitoring the

performance of the agent. An employee would not normally be offered incentives

as they are generally monitored by the principals’ management (Eisenhardt, 1989),

consequently, where the contractors were not offered incentives then it cast

some doubt as to whether the contractors were engaged correctly.

The contractors clearly reported (see Table 35) that they did not receive

incentives at all, suggesting that the hosts were not that worried about the moral

hazards that the contractors could bring to the CTR if they (the contractors)

acted opportunistically.


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Table 35

Incentives


No we don’t need incentives; if I don’t comply with them I don’t have a job.

We don’t offer incentives.

No but the host might.

No they did not offer me any incentives.

We don’t have any incentive bonus.

Yes, but only after a great job [as a reward].

How many times were you given incentives to perform better? contractor; Never.

No we never apply incentives to the contractors or the agents.

Yes we would actually incentivise the workers [contractors] to align themselves with the goals of the host.

This lack of worry may occur because the hosts take a position of control

over the contractor, as they do with an employee, and therefore do not need to

expend resources in the form of incentives to align the goals of the contractor.

The hosts may also take the view that they are already paying the contractors an

attractive hourly rate and have no further need to incentivise the contractors.

However, one large consulting host added, “Contractors are excluded from

performance excellence programs but, they go through a rate review and they

could be paid a spot bonus which is a bonus given to somebody who shows great

behaviour; or a keeper bonus to retain them”.

The hosts also confirmed that (see Table 35) they do not offer incentives to

the agents. Only the agents’ mentioned that they would offer incentives however,

this was not confirmed by the survey findings showing only 25% of the agents

would offer incentives to the contractors (see Table 35). This implies that the

hosts are not at risk and the agents’ feel only slightly more at risk and neither

need to offer incentives to the contractors to motivate them to perform. The

contractors are either sufficiently qualified to perform without incentive or they


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are closely monitored by the hosts (similar to pseudo employees) to ensure that

they do perform. Table 36 shows the survey results, which indicate that the

agents did not offer incentives to the host, but 25% of the agents confirmed that

they did offer incentives to the contractors.

Table 36

Survey findings. Incentives

From agent %

To host 0

To contractor 25

Only the agent was asked if they provided incentives to the other actors.

5.1.6 Agency theory summary

The essence of agency theory is based on the assumption that the contractor

is independent of the principal host and/or agent and that these principals have

to expend resources to monitor or incentivise the agents to minimise moral

hazard and/or adverse selection (Eisenhardt, 1989). This research has established

that 83% of the contractors operate through their own entities (see Table 6).

Therefore, it can be suggested that the contractors are trying to appear to be

independent of the principal(s), either the host or the agent, and as such are

entitled to provide their services as consultants generally operating from their

own premises, at financial risk, managing their own performance, and in business

in general. This consultancy arrangement would satisfy the current taxation and

employment legislation enabling the contractors to continue to perform their

services as legitimate businesses (ATO, 2011). Unfortunately, the data and

findings from this research indicate that the contractors are not truly

independent of either of the principals. The contractors in both the direct and

indirect relationships are integrated into the hosts’ premises and are controlled

by the hosts (see Table 9) where they are not at financial risk and for long

contract periods (average one year) (see Table 7). This was confirmed by the

survey findings showing that when the contractors operated indirectly, 100% of

their agents indicated that they employed them, performed the payroll duties,


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provided insurances, and helped manage their conflict issues. This suggests that

the agents responded as if they were also the employers of the contractors, yet

the contractors were trading through their own entities. The hosts also

commented that they integrated and controlled the contractors (see Table 9),

treated the contractors as employees (see Appendix I Table 59) and that the hosts

were responsible for the contractors’ work direction and errors. The hosts also

commented that they too were the employer of the contractors.

Consequently, even though the contractors may have an entity to trade

through, they may not be genuinely independent rendering their status as not

being an agent of either principal (host or agent). Simply, the independent

contractors appear very similar to employed casuals with the result that agency

theory within the CTR is partially inappropriate (Frama & Jensen, 1983) to predict

the behaviour of all of the actors within the CTR (Barresi, 2005).

5.2 PSYCHOLOGICAL CONTRACT THEORY FINDINGS

The second theoretical lens that was used to inspect the CTR was

psychological contract theory (Rousseau, 1989). As explained in Chapter Two

psychological contract theory concerns the unwritten mutual expectations of

inputs and outcomes of the relationship between an employer and his/her

workforce, or even to the wider society, including the relationship between a

principal and an agent. Adding a third actor into the relationship, as in a

multiagency relationship or CTR then this third actor inserts additional

expectations, inputs and obligations. Further, these new relationships can be

moderated and or mediated by the pressures that impinge upon them from

internal and external demands, i.e. loyalty, trust, conflict, and legislation. The

expectations of the actors may also be moderated or mediated in relation to the

length of time that the relationships exist. Consequently, the perceptions of the

actors within the CTR on the topics of loyalty, the change of loyalty over time,

expectations, legislative governance, financial risk, and internal pressure from

the hosts’ staff were explored.


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5.2.1 Loyalty

The contractors’ verbal findings were supported by their survey findings with

(see Table 37 and Appendix I, Table 69) with five supportive comments indicating

that the contractors were generally more loyal to the hosts than to the agents or

to themselves. The interviews with the agents highlighted (see Table 37 and

Appendix I, Table 69) that their loyalty was evenly distributed between all three

groups, yet there was an indication that their loyalty depended upon how they

were treated and upon the length of the contracts.

Table 37

Loyalty


Mainly to the host, once you are in their office.

I think you build a relationship with that person [an agent] and they get to know the business and the expectations of the business.

Loyalty comes down to personal relationships. So I think the loyalty is more likely to be with the host.

I would say I have been very loyal to the host because I have been working daily with the host. I

like to be loyal to the host.

We treat them like an employee, yes; we are loyal to the contractors.

I have a joint loyalty.

I am always loyal to the host.

The survey findings (see Table 38 and Figure 15 and Figure 16) showed that

when the contractors operated in an indirect manner 76% of the contractors

confirmed that they were initially loyal to the host, but 41% of them commented

that they were also loyal to the agent. Similarly, when the contractors operated in

a direct manner, more of the contractors i.e., 82% of them, confirmed that they

were loyal to the hosts. Even so, 65% of the contractors stated that their loyalty

was directed towards themselves in both the direct or indirect relationships.


155

Table 38

Survey findings. Loyalty



Contractor 65 65 45 45 88

Host 76 82 91 91 100

Agent 41 0 27 0 88

The hosts’ survey findings showed that 91% of the hosts’ expressed a strong

loyalty to their own organisation but

only 45% of them indicated that they

were loyal to the contractors

regardless of whether the contractor

was indirect or direct. The

hosts‘ interview comments supported

this (see Table 37 and Appendix I Table

69), yet two hosts were keen to

comment that the contractors were

only as loyal to them as the next $5 per hour. Overall, the hosts did not comment

strongly that they were loyal to the

agent or the contractor in either

relationship.

The agents’ survey findings

highlighted strongly that 88% of the

agents were loyal to their own

organisation and equally to the

contractor, but all of the agents

stated that they were totally loyal to the hosts. Suggesting that the agents are

reliant upon the hosts for their future business.

Figure 15.0. Psychological contract theory. Loyalty.

Indirect relationship

HOST

AGENT CONTRACTOR

27

100

88

45

41

76

91

88 65

Figure 16.0. Psychological contract theory. Loyalty.

Direct relationship

HOST

CONTRACTOR

45

82

91

65


156

5.2.1.1 Loyalty changing over time

The actors were asked if their loyalty to each other changed over the length

of the contract to check how psychological contract theory related to the CTR.

The contractors’ reported (see Table 39 and Appendix I Table 69) more strongly in

the interview than the survey findings, with four supportive comments revealing

that their loyalty to the host strengthens with time.

Table 39

Loyalty changing over time


Yes, it does change with time as they [the host] come to rely upon me.

When there is a long-term contract the contractors become invisible – they become part of the ‘staff’ or part of the ‘furniture’ like everybody else.

Yes the attitudes of the contractor changes over time to one where it is more about the relationship between him and the host at the end.

The agency practically disappears and after about a year; you

become part of it [the host].

I have seen contractors shift to become ‘like family’, and feeling

like they are employees of the company, and forgetting they are not.

The longer they are there, the more aligned they become with the host, I’m

sure they do.

My relationship with the host changed for the better over time, I became closer.

The contractors’ loyalty changes over time and moves from the agent to us. There’s no loyalty to the company from short-term people but one contractor, who has been here for 15 years I would say is completely loyal to us.

They become more a part of the hosts business. Those contractors who are in long-term relationships, their loyalty is with the host


157

One contractor explained that on long-term contracts the hosts became

reliant upon him. The contractors also stated with two comments that their

loyalty to the agents faded over time, and that the agents ‘practically

disappeared’ or ‘disappeared into the background’. These comments do support

the survey findings with only 25% of the contractors suggesting that their loyalty

to the agent improved over time.

The hosts commented (see Table 39 and Appendix I Table 69) that as the

contracts lengthened then the contractors become ‘like family’ or ‘like part of

the staff’, ’like part of the furniture’ and that the contractors forgot that they

were contractors. One host commented that ‘the contractors’ loyalty changes

over time and moves from the agent to us”. Another host added that there is no

loyalty to the company from short-term people; long-term contractors are

completely loyal to us. These host comments tend to run counter to the survey

findings.

The agents’ commented (see Table 39 and Appendix I Table 69) that the

longer the contracts lasted then the contractors become more aligned with the

host and part of the hosts’ business. Another agent commented that he was sure

that the longer the contractors were in the hosts’ premises, the more aligned

they became with the host. This distancing of the contractor from the agent not

only diminishes the contractors’ loyalty to the agent but it also makes the

contractor look more like an employee of the host. Loyalty is a complex topic for

the contractors as they are supposed to be independent and outcome-based, but

as many sit on the continuum between independent and dependent then their

loyalty will also. As it also does in relation to supply and demand fluctuations i.e.,

when there is a strong demand for their skills then their loyalty would diminish as

they can easily find alternative contracts.

The survey findings are displayed in Table 40 and Figure 17 and suggest 55%

of the contractors’ reported that their loyalty did move towards the host, but 63%

of the hosts’ indicated that their loyalty moves towards the agents on longer-term


158

contracts. There is little loyalty change towards the contractors i.e., only 29% of

both the agents and the hosts indicating

that they felt their loyalty moved

towards the contractors. Interestingly,

only 25% of the contractors stated that

their loyalty was towards the agent. .

The largest shift in loyalty was recorded

by 63% of the hosts’ stating that their

loyalty moved towards the agents. Yet

55% of the contractors’ indicated that their loyalty moved towards the host.

Table 40

Survey findings in relation to loyalty changing over time

Towards: - Contractor % Host % Agent %

Contractors 18 29 29

Hosts 55 55 18

Agents 25 63 50

5.2.2 Expectations

As psychological contract theory is based upon the mutual expectations of

the actors (Guest, 2004), they were asked to confirm if they provided their

expectations to the other actors, and if they received the other actors’

expectations. The contractors were also asked in the survey if their expectations

were met. The interview findings from the contractors’ reported (see Table 41

and Appendix I Table 70) a mixed picture, with some contractors confirming in a

ratio of 5:2 that they received expectations from the host, yet others did not. The

hosts also verbally reported (see Table 41 and Appendix I Table 70) a mixed

situation, with four comments stating that they would not give their expectation

to the agent or the contractor, with one of the four host’s adding that, “we know

the agents so well that we would not need to give the agents any more

information”. Three host comments were made supporting the fact that they did

Figure 17.0. Psychological contract theory. Loyalty

change over time.

HOST

AGENT CONTRACTOR

63

18

29

29

25

55

55

50 18


159

provide expectations to the other two actors i.e., two to the agents and one to

the contractors.

Two agents confirmed (see Table 41 and Appendix I Table 70) that where

the hosts’ expectations were provided to them so that they could in turn inform

the contractors, that they would definitely pass this information on to the

contractors regardless of how clear they were.

Table 41

Expectations.


They [the host] sat

me down on day one and told me what they expected, apart from that there was no supervision.

We have stock

standard Terms and Conditions, so if the agent does not sign these then they will not engage with us.

The hosts

expectations are written and passed on to the contractor.

No the host doesn’t give me their expectations

We would not seek agency expectations.

Some have clear expectations and other not so clear.

Yes I got expectations every time.

I don’t think the agent or the contractor would put their expectations in writing.

We let the contractors know of the hosts expectations.

The survey findings (see Table 42 and Figure 18 and Figure 19) indicate

quite strongly that all three actors provided their expectations to the other two

actors (see Table 42).


160

Table 42

Survey findings. Expectations


From Expectations received

Agent 53 73 -

Host 76 - -

Contractor - 73 -

To Expectations given

Agent 65 82 -

Host 59 - 50

Contractor - 91 50

The lowest response confirmed that the agents’ provided 50% of their

expectations to the hosts, and 50% to the contractors (see Figure 18).

Interestingly, the reverse did not reflect this with contractors’ providing 65% of

their expectations to the agent, and the hosts’ providing 82% of their

expectations to the agent. However, the agents’ reported that they did not

receive any expectations (see Figure 19) from either the hosts or the contractors.

Generally, the actors reported that they provided more expectations than they

received, suggesting that there is an imbalance of their psychological contacts

and therefore a potential lack of performance.

Figure 18.0. Psychological contract theory.

Expectations given

HOST

AGENT CONTRACTOR

82

50

50

91

65

59

Figure 19.0. Psychological contract theory.

Expectations received

HOST

AGENT CONTRACTOR

73 73

76

53


161

Table 43

Were the expectations met?

Contractor perspective Indirect % Direct %

Yes? 82 71

Regardless of whether the contractors operated in a direct or indirect

manner, the findings reported that a large percentage of contractors’ confirmed

(see Table 43) that their expectations were generally met.

5.2.3 Internal pressures

From the Venn diagram in Chapter Two (see Figure 9) it can be seen that

internal and external pressures do apply to the CTR. The actors were asked to

explain if they were aware of any internal pressures and if they ever felt

ostracised within the host premises, or if they were pressured to reduce their

rates, or to incorporate to reduce the employment risks to the host, or if they

were aware of the hosts’ demanding that the agents or contractors sign onerous

contracts.

The interview comments from the contractors in relation to internal

pressures were not supported by the survey findings, reporting (see Table 44 and

Appendix I Table 71) that they were often ostracised by the hosts’ staff. One

contractor informed the author that in 90% of the hosts’ premises there would be

‘a dig somewhere’, and another contractor commented that in 80% of the hosts’

premises they were ostracised with some hosts’ staff being ‘really really bad’.

Another contractor commented that they were always called the ‘greedy

contractors’.

Only one contractor had not experienced being ostracised by the hosts’ staff.

The contractors were clearly of the opinion that they were pressured by the hosts

and the agents to incorporate at the risk of not being offered work, and at times

they felt pressure to reduce their rates and/or to accept difficult contractual

clauses.


162

Table 44

Internal pressures


Did you ever feel ostracised by the host’s staff? Contractor: Oh yes

quite frequently. I’d say in 90% of the places there would be a ‘dig’ somewhere.

No, the contractors do not get ostracised.

I think the contractors' extra they earn must compensate for

being ostracised

We were always called the greedy contractors. We sometimes pick

up on one of our employees getting a little bit disgruntled if it comes to light that a contractor earns $50 an hour, yet the employee is earning $25 an hour doing the same job.

Is there a discrepancy in the host premises at times with difference in pay rates? Agent: Yeah we have had that quite a lot.

Yes. All the time. I

would say 80% all the time that I was ostracized. In some places, they are really, really bad and they tell you to your face, you are the contractor. [The host says] You can only join this company if you become a contractor.

We do come across contractors being ostracised.

Our agency is definitely expected to sign hold-harmless clauses from the client.

Yes, we do get pressured to reduce our rates.

Yes, we do force people to incorporate.

Yes there are pressures to bring down rates.

I told the host to pay me more money

‘now’ as there was plenty of work around.

Yes we might encourage that

person to engage with us via an ABN or CAN and become a direct contractor.

Yes the clients are forcing us to take

out insurances for people we don’t employ.

I wouldn’t say we pressure them but giving them a choice is more the way I would word it.


163

Again, the hosts’ interview findings were not supported with the survey

findings. One host reported (see Table 45 and Appendix I Table 71) that the

contractors were not ostracised, however, another host suggested that they

sometimes became aware of it only when their own staff employees became

disgruntled due to the difference in the contractors’ pay rates when compared to

those of their employees. Another host simply disagreed, and stated that the

contractors did not get ostracised. The hosts’ tended to confirm that they did

apply pressure to the contractors and to the agents to ensure that the contractors

were incorporated, but with a softer comment suggesting that they would

‘encourage’ rather than enforce their will. They also commented that they found

it easy to ‘scale back rates’ or ‘dispense’ with the contractors with little notice,

or ‘just not use’ the agents if their contractual conditions were not accepted, or

even ‘when the situation suited them’.

The agents’ reported (see Table 44 and Appendix I Table 71) that they were

aware of the pay rate discrepancy between the contractors and the hosts’

employees, but commented that the extra money that the contractors were paid

must compensate for them being ostracised. Another stated that they were well

aware of the contractors being ostracised.

The agents also agreed that they were definitely required, and sometimes

bullied, into accepting onerous hold-harmless clauses. However, the agents’

explained that when the hosts applied these conditions to them they did try to

offset these clauses by passing them on to the contractors. The agents’ also felt

pressured at times to purchase insurances to cover the contractors’ activities

when they technically did not employ them. They confirmed that they did this

just to offset any claim that the host may make upon them. One agent also

explained that he felt pressured when the contractors’ demanded an increase in

rate, which he could not ask the host to support.


164

Table 45

Survey findings. Internal pressures


Ostracised by staff 24 9 13

Pressured to reduce rates 18 - 38

The survey findings clearly demonstrate that only a small percentage of the

actors felt that they were aware of the contractors being ostracised when they

were working alongside the hosts’ employees in the hosts’ premises, nor were

they aware that the contractors were pressured to reduce their rates. Even

though these percentages are small, 24% of the contractors’ indicated that they

felt ostracised, but only 9% of the hosts’ indicated that they were aware of it.

Thirty-eight percent of the agents also indicated that they were pressured at

times to reduce their rates but only 18% of the contractors’ felt this.

5.2.4 External pressures

There are several external pressures that can affect the CTR including

legislation (e.g., taxation, employment law, and occupational health and safety

requirements, insurance requirements), and the economy in general, which can

moderate the supply and demand of resource projects and therefore the demand

for the contractors and the rates to attract them. The interview findings reflected

a number of these points (see Table 46 and Appendix I Table 72) with one agent

confirming that he was forced to sign hold-harmless clauses. Another agent was

pressured to bring down his rates and yet another commented that he was forced

to insure the contractor even though the contractor was trading through an entity.

Three hosts admitted that they forced people, or as one host stated ‘encouraged

them’, to incorporate before they would appoint them.


165

Table 46

External pressure


[The host says] You can only join this company if you become a contractor.


Our agency is definitely expected to sign hold-

harmless clauses from the client.

Yes we do get pressured to reduce our rates.

Yes, we might encourage that person to engage with us via an ABN or CAN and become a direct contractor.

Yes, there are pressures to bring down rates.

I told the host to pay me more money now as there was plenty of work around. [contractor exerting power].


Yes, the clients are forcing us to take out insurances for people, [host exerting power].

The 80/20 (see Table 22) taxation rule is another example of how the CTR

can experience external pressure because of legislation and how the actors have

modified their behaviour as a result of this pressure. The survey and interview

findings in relation to this topic indicated that even though the hosts and the

agents felt that the contractors did comply with the 80/20 taxation rule, only 28%

of the contractors’ commented that they did comply with it. This external

pressure on the contractors to comply, has led the contractors to use evasive

measures. Some long-term, similarly skilled, contractors have learned to swap

hosts with other ‘trapped’ contractors (this avoids the problem for two

contractors), or to swap agents but not the host, so that they can honestly

provide receipts from another entity whilst remaining with the same host. This

behaviour may not please the original agent, as this agent performed the work to

select and recruit the contractor for their host and now feel pressured to let the

contractor go to another perhaps competitive agency. Interestingly, one


166

contractor commented that he used his ‘expert knowledge (power)’ to reverse

the pressure on the hosts by demanding more money when there was plenty of

work around.

5.2.5 Mutual obligations

The psychological contract theory (Guest, 2004) mainly discusses the bi-

partite relationship where promises, made or broken, affect two people. When a

third actor is introduced into the relationship as with the CTR then the

psychological contracts between the three actors become complicated. As the

three actors within the CTR may have high or low levels of obligations or

expectations of the other two actors, (as displayed in Table 47) and in the

circumstance where one of the three actors have misaligned objectives then there

are 12 alternative two-way combinations of obligations with only three, two-way

instances of quasi-spot (low-low obligations) and three, two-way high-high

combinations of obligations in a CTR. For the contractor to perform efficiently

then he/she would have to be in the high-high pair or ‘M-high’ pair that includes

them. All other combinations imply potential problems for the contractors, as

their psychological contracts are potentially misaligned. Consequently, the actors

must be cognisant of the dynamics of the CTR so that the misaligned actor

(especially where this is the contractor) can perform efficiently. Interestingly,

where the contractors are involved in a low-low pair or ‘Q-S’, this implies that the

obligations between the host and the contractor are balanced but low, suggesting

weak psychological contracts and potentially a lack of loyalty from both actors,

which might be the case where the contracts are coming to an end.

Unfortunately, the survey and interview findings indicate that the agent and the

contractor on shorter contracts were strongly loyal to the host, but the host did

not reciprocate this loyalty (see Table 37 and Table 38). Consequently, there is a

loyalty misalignment between the host and the contractor suggesting that the

performance of the contractor will suffer.


167

Table 47

Multiple psychological obligations of 2-way relationship in the CTR i.e. one actor is

neutral or eliminated, as in long-term contracts

C low C high A low A high

H low ‘Q-S’ H under Q-S H under

H high H over ‘M high’ H over M high

A low Q-S A under - -

A high A over M high - -

H = Host, A= Agent, C = Contractor, Q-S = Quasi-Spot i.e. where there are low obligations from 2 of the 3 actors.

The findings also suggest that as the contracts became longer then the

contractors’ loyalty to the agents reduces but their loyalty to the hosts’

strengthened. In this situation, it could be argued that the agents become neutral

in the CTR resulting in the contractors and the hosts having mutual high and

aligning obligations. This bipartite scenario could resemble an

employer/employee relationship and further suggests that the contractors’

performance may not be compromised even though all three actors’ obligations

do not align.

Whilst reviewing the relationship through the theoretical lens of

psychological contract theory (Guest, 2004), it was also found that the actors

generally provided their expectations to the other two actors within the CTR and

that the contractors confirmed that their expectations were strongly met in both

the direct and indirect relationships. However, it can be noted that in several

cases the actors referred to transactional expectations rather than relational

expectations, indicating that the contractors were mainly interested in the

remuneration rather than relationships with the host or the agent.

The contractors reported that they were strongly ostracised by the hosts’

staff, which made them feel uncomfortable at times. This was commented upon

by one agent who said: “the contractors are being paid well enough for them to

simply have to deal with it without it affecting their performance”. Clearly being

ostracised would put pressure or the contractors’ psychological contracts with

both the agent and the host, however, one contractor added that when he was


168

ostracised he would respond suggesting that if the staff wanted his conditions

then they should simply contract. This particular contractor was well experienced

and probably more independent than some others, consequently, he knew how to

deflect the ‘internal pressure’ and not to let it upset his psychological contract

with the host. A less strong or more dependent contractor would probably find

being pressured by the hosts’ staff more difficult to handle resulting in their

psychological contract being under pressure.

The external pressures of trying to comply with the taxation legislation and

in particular the 80/20 taxation rule did affect the contractors’ psychological

contracts. At times they had to breach their performance contracts (and hence

psychological contracts) before their income from one host reached 80% of their

annual income (See 80/20 rule Appendix D). The contractors would have to either

swap hosts or swap agents, or find an alternative contract to avoid breaching this

legislation. This breach behaviour and spill-over effect would in turn affect the

agents and the hosts as they would lose an experienced resource.

Where the contractors’ disregarded the 80/20 rule then there would not be

a breach of their psychological contracts, but they would be potentially at risk of

being declared a non-legitimate business for taxation purposes, with the potential

ramification of being in breach of the employment legislation with wider

consequences for the host and the agent. In these situations, the psychological

contracts between all three actors would be under strain. Overall, it can be

stated that psychological contract theory was only partially applicable to

predicting the nuances of the CTR, as the multi-faceted relationships and

personalities within the CTR provide too many variables to enable the theory to

broadly apply.


169

5.3 THEORY OF POWER, FINDINGS

5.3.1 Supervision and power

The CTR was also inspected through the lens of the theory of power Rajan

and Zingales (1997) to investigate which, if any, of the actors held power over the

other actors. The exploration also sought to determine if power changed in

relation to the length of the contracts, and if there was conflict in the

relationships.

Table 48

Supervision and power


The host always provides day-to-day supervision.

Our line management is responsible for the day-to-day management of the contractors.

The host is responsible for the work and supervising the work.

Whether we operate in a direct or indirect manner the host is responsible for my actions.

Supervision goes into that grey area whether someone is a contractor or an employee. It can have a huge impact… and we direct.

We don’t accept responsibility for the actions of the contractor when they are under supervision and control of

the host. The client was the one who gave me day-to-day instructions.

The manager of that area, will manage the contractors’ output, not the agency.

Generally it is the host who manages the independent contractor’s output.

As supervision can be interpreted as power, then the interview findings

(see Table 48 and Appendix I Table 73) similarly indicated that as the hosts mostly

held the power in the relationship, as seven contractors against two confirmed


170

that the hosts provided day-to-day supervision and that the hosts were

responsible for the contractors’ actions.

The hosts overwhelmingly supported the contractors’ comments with nine

statements that they were the supervisors of the contractors. However, the hosts

were still uncomfortable with this as one host explained that if they did fully

supervise the contractors then “they are just another employee”. Another host

commented that supervising the contractors can have a huge impact as control

could be interpreted as a feature of employment. A third host explained that they

tried to keep their distance from being seen as the employer but [through

supervising them] “it doesn’t work”.

The agents were also keen to remove themselves from being seen as the

employers of the contractors stating that it was the hosts’ who were responsible

for them and that the agents did not accept responsibility for the contractors as

the contractors were under the supervision and control by the hosts. Another

agent added that the hosts’ apply the same pressures to the direct contractors in

a similar manner as they force the agents to sign onerous contractual clauses. He

added that this was more typical of the larger multinational companies. The

contractors’ survey findings reported (see Table 49 and Figure 20 and 21) that all

the actors concurred that the host held the power in both the direct and indirect

relationships.

Table 49

Survey findings. Power in a direct and indirect relationship?

Who holds the power? Contractor % Host % Agent %

Contractor’s perspective

Direct 6 65 0

Indirect 6 47 12

Host’s perspective

Direct 0 64 0

Indirect 0 55 -

Agent’s perspective

Direct 25 25 0

Indirect 0 13 13


171

Sixty-five per cent of the contractors’ felt that the hosts held the power in

the direct relationships and 47% of the contractors’ reported that the hosts held

the power in the indirect relationship.

The hosts’ survey findings indicated that they agreed with the contractors

with 64% and 55% of the hosts’ reporting that they held the power in both direct

and indirect relationships respectively.

The results indicated that the hosts did not feel as though the agents or the

contractors held any power at all in the CTR in either relationship. Interestingly,

the agents did not feel as though the hosts or the contractors held much power

either. Only 13% of the agents’ reported that they held power in an indirect

relationship and only 25% of the agents’ indicated that the contractors and the

hosts held small amounts power. The actors were asked if the power within the

relationship changed over time and if so to whom.

5.3.2 Power change over time

The contractors’ interview findings reported that the agents’ power drops

out of the picture very quickly (see Table 50). Another added that the agents’

power reduces and goes to the host. One contractor echoed this statement and

confirmed that the power moves to the host. Only one contractor suggested that

he had been in a CTR where the power ‘was kind of equal’. The agents’

comments were in synergy with the contractors’ comments, confirming that after

Figure 20.0. Theory of power.

Direct relationship

HOST

AGENT CONTRACTOR

0

25

25

0

0

65

0 6

64

Figure 21.0. Theory of power.

Indirect relationship

HOST

AGENT CONTRACTOR

-

13

0

0

12

47

13 6

55


172

long periods then the agents’ power becomes diluted. Another confirmed that the

contractors became more powerful over time, with another agent suggesting that

the hosts would be nervous about losing a knowledgeable (powerful) contractor

who they had built-up to understand their project.

Table 50

Power change over time


The power of the agent disappears quickly, very quickly. The agency practically disappears unless I call them.

After a year the agent’s power is diluted but the contractor power becomes more apparent.

The agency power drops out and the power goes to the host. I never thought of the agency having the power except that they pay you. As soon as you get a job they drop out of the picture.

He [the contractor] held expert power all through his contract. The agent slipped away as they were no longer involved. The agency power practically disappears unless I call them. After a year I become part of it [the host] and function like an employee. Our powers are kind of equal.

Some hosts would be nervous of losing a knowledgeable contractor that they have built up.

The agency is diluted all the way through. Yes, I think it (power)

shifts all the time. I think the contractors’ power after a year becomes more apparent. I think the agency power is diluted at that point.


173

The contractors’ power (albeit until the contractors’ expert power is

extinguished) would modify the relationships within the CTR, potentially inverting

the traditional principal/agent relationships. The consequence would place the

host and the agent in a subordinate role in relation to their psychological

contracts with the now powerful contractor, where the host or the agent has

little control over the contractors’ performance.

A recent international example of the power being in the hands of a

contractor was evidenced where a Russian contractor, constructing the Belarusian

Nuclear Power Plant (NPP), ran into financial difficulties. Andrei Barkun the head

of Belarusian NPP commented at a press conference that if Belarus lost the

existing contractor then this "will not benefit anyone” (CIS Energy Daily, 2015),

and explained that replacing the contractor would be followed by the process of

selecting a new contractor with additional costs to Belarus. The power in this

example clearly rests with the contractor, rendering the principal unable to

replace the contractor without suffering financial penalties and delays. It was

highlighted by Bush, (2009) that these potential turnover costs can be attributed

to the lack of leadership on behalf of the principal and further suggests that a

different approach to managing contractors should be considered. Emphasising

when the contractors have power in the relationship then they have little need

for loyalty and they may be more inclined to leave the host as a result of small

irritations.

The survey findings (see Table 51 and Figure 22) indicate that on long

projects 65% of the contractors and 75%

of the agents reported that power moved

towards the contractors. However, 63% of

the agents and 55% of the hosts reported

that power was more likely to move

towards the hosts. Not one of the hosts

(0%) indicated that power moved towards

the agents. It appears logical that the

Figure 22.0. Theory of power. Power change over time.

HOST

AGENT CONTRACTOR

0

63

75

36

41

53

55

38 65

Figure 22.0. Theory of power. Power change over time.

HOST

AGENT CONTRACTOR

0

63

75

36

41

53

55

38 65


174

agents’ strongly felt that the power moved towards the hosts and to the

contractors on long contracts. Ten per cent more contractors’ than hosts’ (and

27% more contractors than the agents) felt that the power shifted towards the

contractors as the term of the contracts extended.

Table 51

Power change over time


Contractors’ perspective 65 53 41

Hosts’ perspective 36 55 0

Agents’ perspective 75 63 38

As a consequence of power being applied within the CTR the actors were

asked to confirm which actor in the CTR managed conflict.

5.3.3 Conflict

The contractors verbally reported (see Table 52) that if there were conflict

whilst working in the hosts’ premises then the host would either resolve it or

invite the agent to help resolve it together. Alternatively, the host may exercise

its power and simply ask the contractor to leave. The contractor confirmed that

they had never had the agent talk to them in relation to resolving conflict.

Another contractor confirmed that conflict was sorted out at site [without the

involvement of the agent].

The hosts’ commented (see Table 52) that there was not a lot of conflict

with the contractors, but if there was an issue then the hosts would treat them

like employees. However, if conflict could not be resolved then the host would

just send the indirect contractor back to the agent or terminate the direct

contractors’ contract. One host had never had an agent in his premises to resolve

conflict. Another agreed that there is less tolerance and protection for the

contractors.


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The agents verbally confirmed (see Table 52) that they were the focal point

for any conflict and that it was their responsibility to manage conflict and to

manage it quickly. Another two agents commented contra to the general

comments, suggesting that it was the host who was responsible or managing

conflict, and that it was a collaborative effort. One large agency commented that

conflict was managed in the traditional way, by avoidance.

Table 52

Conflict


So basically, the conflict is sorted out at site.

There is not a lot of internal conflict.

So how is conflict resolved? Agent; Good questions. In the traditional

way, avoidance. No, the agency never got involved. The host manages conflict.

There’s less tolerance. There’s less protection.

That’s where conflict and challenges come up as the host gets quite aligned with the employees [contractor], they feel like they are an employee and they are not.

I’ve never had an agent talk to me about my job [to try to resolve conflict].

The contractor would be treated like an employee, with conflict being managed by the manager in the department. Not the

agent.

On a weekly basis we give them the opportunity to tell us something that’s not right or something that’s different.

Conflict is managed by the host.

The contractors’ survey findings demonstrated that 72% of them confirmed

that in a direct relationship they were responsible for resolving conflict, but only

33% of them suggested that in an indirect relationship the hosts were responsible

for managing conflict (see Table 53).


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Table 53

Survey findings. Conflict



host entity host host agency

Managing conflict 33 72 82 82 63

The survey findings from the hosts’ perspective confirmed that 82% of them

felt that they were responsible for managing conflict in both direct and indirect

relationships. Interestingly, the survey findings from the perspective of the agents

showed that 63% of the agents’ reported that they were responsible for managing

conflict in an indirect relationship. Thus, the survey findings indicate a confused

picture as to who manages conflict within the CTR, with all three actors strongly

nominating themselves as being responsible for resolving conflict.

5.3.4 Summary

As defined in Chapter Two, power is the ability to achieve a goal even

against the resistance of others (Tompkins & Cheney, 1985). For the CTR to

achieve a goal the hosts need to deliver its designs or completed construction

projects on time, which means that all three actors must achieve their individual

goals in a timely and professional manner (their obligations and commitment must

align). Consequently, there is little room in the CTR for lack of cooperation or

power struggles.

As the relationships within the CTR have to find their own equilibrium we

have seen that the agents tend to remove themselves from being too involved

with the CTR except for running a payroll for the contractor and providing one-off

services to the host, i.e. where the host may need additional contractors. The

host and the contractor then tend to adopt a master/servant style relationship

similar to that of an employer/employee relationship with the host holding the

legitimate power of an employer and the contractor holding some level of expert

power and knowledge that the hosts require.


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As with agency theory (Mitnick, 2006) and psychological contract theory

(Maahs, 2004), the theory of power (Rajan & Zingales, 1997) can be seen to be

partially applicable to explaining the multiple relationships of the CTR.

5.4 ALTERNATIVE ENGAGEMENT APPROACH, AND FINDINGS

At the conclusion of the interviews all actors were asked if they felt if an

alternative ‘joint employment’ method of contracting might better serve them to

reduce the uncertainty that they expressed.

5.4.1 Joint employment

The contractor interviews (see Table 54) reported mixed statements in

relation to joint employment or alternatives to the CTR. One suggesting that the

present system “was not all that good, but he was not going to try to change it”.

Another suggested that it “hadn’t worked well since the 1990s”, with another

stating that the legislation was ‘stupid’ and that the contractors should be

engaged as casuals.

One host verbally confirmed (see Table 54) that he was happy with the

present system as it enabled him to obtain contractors to do some work for them.

A second host suggested that a joint employment would perhaps “stop things

falling through the cracks”.


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Table 54

Is there a better alternative to the CTR?


I’m not sure the present system is all that good. That’s how is it works. I'm not going to change it.

Yes, I think joint employment would provide a better OHS, plus day-to-day management support of the contractor. Because it would stop things falling through the cracks. It [failures] wouldn’t happen with a joint employment agreement.

I'd like it to happen across all jurisdictions so that it was clear who is an employee and who isn’t.

The friend was earning $1000 per day and had been for the last 7 years in the same organisation. Why would you want to upset that? This is modern employment

You would probably be better off employing contractor as casuals.

I think we’re happy with the system the way it is because it allows us to get people to do a piece of work and it hasn’t created issues for us that have made us look at it in more detail.

He acknowledged that the system was wrong but shrugged his shoulders and commented that the risk was negligible because nothing had gone wrong so far!

Why try to fix a problem or system that isn’t broken?

The system is working due to stupid government policy. You would be stupid if you did not take advantage of it.

A system that made it all clearer, would definitely help.

The present system is cumbersome, yes we could undoubtedly improve the way we do it, but it would be a hard task.

The agents also provided a wide array of opinions (see Table 54) when

asked if there was a better way to engage the contractors. Some commented that

the present system worked well or very well, yet another suggested that the

present system was wrong, with one agent shrugging his shoulders explaining that


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nothing had gone wrong so far. Others could not see any other way to engage

contractors, whilst others wanted a new system that would make it clearer.

Another commented that the present system was cumbersome.

Table 55

Survey findings. Joint employment


Attractive proposition 29 18 38 Neutral 35 9 38 Unattractive proposition 35 64 25

The survey findings (see Table 55) in relation to the question “Would joint

employment be an attractive proposition as a replacement for the present

situation”, indicated that the only hosts had strong opinions i.e., 64% of the hosts

reported that joint employment was an unattractive proposition, whereas the

agents and the contractors were equally divided between attractive, neutral and

unattractive.

On this topic, there were two comments from one academic, which were

relevant (see Table 54). The academic clearly questioned why people would want

to upset a system that he defined as ‘modern employment’ where people were

able to earn good money. He also questioned why anyone would want to “fix a

system that wasn’t broken’. Clearly the academic, like many of the actors in this

thesis, had his own opinion on the legislation that surrounds the CTR and

commented accordingly implying that the system did not need to be fixed.

This chapter revealed the attitudes and the feelings of the actors in relation to the

three theories, agency theory (Eisenhardt, 1989), psychological contract theory (Guest,

2004), and the theory of power (Ranjan & Zingales, 1997) that were used as lenses to

inspect the CTR. Chapter Six will combine the findings from Chapters Four and Five to

integrate the thesis in an overall manner.


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CHAPTER SIX 6.1 INTRODUCTION

The primary purpose of the current program of research was to investigate

and explore the contemporary phenomenon of the CTR in the context of white-

collar technical and professional contractors operating through their entities and

being engaged in a direct or indirect manner in Australia’s mining, engineering, IT

and construction sectors. The goal of this exploratory investigation was to provide

clarity of operation for the actors within the CTR and to improve the manner in

which the relationship operated. To this end, this research was designed to

provide a platform from which a follow-up study on the same topic could be

prosecuted, with the results to be issued to the Australian government in the form

of a White Paper.

Prior to the design of this research, alternative theories through which to

investigate the topic were considered i.e., social exchange theory (Homans, 1958)

and stakeholder theory (Azburg & Webb, 1999). Further, the approach to focus

the research on some of the social and/or legal aspects of the CTR were also

considered. However, as this topic is nascent it was decided to research the topic

with a truly exploratory attitude in the style of a grounded approach.

Consequently, this research was delimited to using three broad theories as lenses

through which to view the CTR, agency theory (Eisenhardt, 1989), psychological

contract theory (Guest, 2004), and the theory of power (Ranjan & Zingales, 1997).

It was also decided not to focus the design on any topic of interest or a

multidimensional theoretical approach until this first exploratory research was

concluded.

Chapter One laid the foundation for the research and introduced the topic of

the contractual tripartite relationship (CTR) and its application and growth in

Australia’s industrial landscape. Chapter Two reviewed and outlined the

theoretical lenses through which this study was inspected i.e. agency theory

(Eisenhardt, 1989), psychological contract theory (Guest, 2004), and the theory of

power (Ranjan & Zingales, 1997). Chapter Three presented the research design


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and described the qualitative interview and survey methodologies. As the

exploratory findings were large, two chapters i.e. Chapters Four and Five were

created to present and discuss the findings. Chapter Four details the general

findings and discussions in relation to the ‘wider contextual topics’, and Chapter

Five details the findings in relation to the theoretical lenses that were used to

inspect the topic. The conclusion of Chapter Five provides a summary of the

findings in relation to the three theories.

Chapter Six provides a conclusion to the Doctor of Business Administration

(DBA) research project offering a discussion regarding the findings in Chapters

Four and Five. It will also provide the implications and contributions to the body

of knowledge, the limitations of the study and recommendations for future

research, plus a general comment upon the future of flexible employment

arrangements. The chapter formally concludes with a summary of the whole

study.

This exploratory study into the broad operations of the CTR has shown that

its actors are generally confused as to how it functions, as the relationships within

it are extremely complicated and the legislation that surrounds the CTR is

difficult to apply and serves only to compound the actors’ uncertainty. It is

therefore not surprising that the overall conclusion to this research is that the

three cohorts of actors of the CTR are unsure as to how the CTR should function.

6.1.1 Overview

There have been a plethora of government and union investigations into

some of the features of the CTR and labour-hire tripartite relationships over the

last 25 years (see Appendix E), including the enactment of the Independent

Contractors Act Commonwealth of Australia (2006) to provide guidelines for this

unique triangular relationship. However, the current study demonstrates that the

three cohorts of the CTR are generally confused as to which of them, if any,

employs or engages the contractors and therefore, which actor should be


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responsible for the contractors’ employment liabilities i.e. taxation, insurances,

conflict resolution, inductions, superannuation or day-to-day management.

Not only did this study find that there were actors in the market who were

genuinely ignorant of their legal obligations in relation to the CTR, but it also

found that there were some actors who were deliberately using the lack of clarity

within the legislation to avoid their employment responsibilities in order to

maximise their financial benefit. As one contractor commented, “you would be

stupid not to take advantage of the policies”. Further, this study has exposed

how complex the CTR can be with multiple relationships generating power

imbalances, difficult psychological contracts, and complicated agency

relationships.

Most of the previous studies involving tripartite relationships have focused

upon the precarious industrial labour-hire blue-collar cohort rather than the

white-collar professional and technical cohort where the contractors’ are

incorporated and engaged via their own entities under commercial contracts.

Consequently, this study was purposely designed to explore the white-collar

cohort and to lay a foundation from which future studies into this sector could

expand the topic. Initially, a qualitative interview methodology was performed,

using the three groups of actors who comprise the CTR i.e., the hosts, agents and

contractors. Using a qualitative interview methodology as the first phase of the

research this allowed a grounded approach to explore the lived experiences of the

actors rather than requesting them to respond to a set of standard questions from

the researcher. The gleaned findings from the interviews were then used to

inform a survey which was issued to different groups of actors from the same

cohorts. This not only directed the research but also provided a necessary a

(Creswell & Plano, 2007) that was required to support internal validity

Two computer programs were also used to assist with the research. Nvivo

(QSR, 2013), to collate and assist with the thematic approach to analysing the


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interview records and ‘KeySurvey’ (KeySurvey, 2015) to create the three surveys

and to analyse the returned data.

6.2 WIDER CONTEXTUAL TOPICS - KEY FINDINGS

6.2.1. Average contractor

This research provides a picture of the average contractor being a 48-year-

old male, who used an entity to trade through, and who was directed and

controlled by the host in the host’s premises for 94% of his working week on

contracts that on average ran longer than one year. It was also found that this

average contractor made a deliberate decision to contract, and that this decision

was not due to trying to find a contract that would evolve into a permanent role,

rather it was made to improve his remuneration and provide a flexible lifestyle.

The average host wanted to engage contractors either directly or indirectly

to provide a flexibility that enabled it to manage their peak workloads and to

reduce its overheads without the risk of being sued for breach of employment

legislation i.e. wrongful dismissal. The decision to hire contractors in a CTR was

also a deliberate choice for flexibility and not one to take advantage of the

legislation.

6.2.2 Employment or engagement

When the actors discussed the topic of the contractors’ being employed

there were very few who used the term engaged, even though 83% of the

contractors were engaged using entities to trade through. In fact it was generally

found that the actors could not confidently state which of them employed or

engaged the contractor or what level of responsibility for employment they had

towards the contractors or the other actors. In a direct relationship there was less

doubt as to whether the host or the contractor’s entity employed the contractor,

but in an indirect relationship it was strongly felt that the agents employed the

contractors, even where the contractors were using an entity to trade through

and not employed by the agent at all.


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Interestingly though, the hosts seemed to accept most of the responsibilities

in both the direct and indirect relationships yet the agents still felt responsible

for the contractors’ employment and conflict resolution. Defining whether the

contractors were employed or engaged has consequences for the relationship, as

it is important for the actors to understand their liabilities and responsibilities.

Unfortunately, the relationships within the CTR can and do change based upon the

levels of control that the hosts’ may exert, or which actor remunerates the

contractor or collects taxes, thus making it difficult for the individual actors to

fully understand their positions within the CTR even though they may suggest that

they do.

Where the hosts deliberately or innocently misclassify an employee as a

contractor in an attempt to maximise their income then the hosts may, if

investigated, be penalised, but as Riley explains in her chapter, “Regulatory

responses to the blurring boundary between employment and self-employment: a

view from the Antipodes” in “Recent developments in Labour Law”, that the only

legal risk faced by the hosts by misclassifying the contractors in Australia, is the

small cost of reclassifying them back to being employees. She, therefore, suggests

that the hosts’ feel that the risk is well worth taking (Riley, 2013).

6.2.3 Complexity

The fact that there are many combinations of relationships within the CTR

was seen to add complexity and uncertainty to its operation. Chapter Two

explained that there are eight different three-way combinations of obligations

(see Table 2), plus twelve potentially different bi-partite combinations of

relationships (see Table 47) when one of the actors adopts a totally neutral

position. These permutations of the relationships are made much more complex

where one or all of the actors have partial and varying obligations to the other

actors, making it difficult or nearly impossible to stipulate a standard CTR,

especially when these permutations are combined with asymmetric information,

misaligned goals, different risk profiles, differing loyalties, personalities,


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psychological contracts, and at times an unwelcome exertion of pressure from one

of the actors, or where some actors deliberately spurn the system or sham. All of

these factors contribute to the CTR being generally misunderstood or mismanaged

(innocently or deliberately), and confused by many of the actors. Confusion

therefore in the CTR is a major underlying issue, which should be resolved for the

thousands of contractors, hosts and agents who operate within it.

6.2.4 Confusion

Chapter Four and Five detailed many of the issues that the actors struggled

with in relation to the legislation (see Table 23 and 24) surrounding the topic of

employment or engagement (see Table 12 and 13). Clearly as seen above the

white-collar technical contractors, the hosts and the agents within the CTR are

confused as to how they should operate within the CTR, but interestingly the

majority of them commented that they would prefer that the present system

didn’t change. They simply wanted the CTR to continue ‘as is’ in spite of the

confusion so that they could continue to enjoy its benefits (mainly financial) even

at the risk of being penalised by the ATO if they were ever audited. It must be

noted here that the market conditions were favourable at the time of writing.

The confusion that was highlighted in Chapter Five also dislodged the

application of the theories that were applied to try to inspect the functionality of

the CTR as the actors did not really know where they stood in terms of their

employment or engagement. Unfortunately, all of the interesting theoretically

features within agency theory (Eisenhardt, 1989), psychological contract theory

(Guest, 2004), and the theory of power (Ranjan & Zingales, 1997), that interplay

within the CTR and detailed in Chapter Two had little relevance when compared

to the topic of confusion. The theoretic lenses did however highlight some

interesting aspects of the CTR especially where a part of a theory could be

applied in a triangular manner, for example the spillover effect within

psychological contract theory was particularly relevant and useful in analysing the


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potential consequences of the actors’ broken psychological contracts and the

resultant power imbalances within the CTR.

If this uncertainty could be resolved as suggested in 6.3 then the internal

dynamics of the CTR would settle and its functionality could be efficiently

monitored more efficiently with a potential view to creating a new social theory

to predict this phenomenon’s behaviour.

6.3 FUTURE DIRECTION

As confusion was found to be the dominant theme to emerge from the

research (see Chapter Five) then eliminating, or at a minimum reducing confusion,

within the CTR is an outcome of the findings of this research and an objective

that should be given serious priority.

Three ways of reducing confusion are suggested plus a reference to how the

New Zealand Government dealt with similar confusion. Firstly, Professor Stewart’s

2005 recommendation to the Australian government need to be revisited.

Secondly, a clear definition of ‘dependent contractor’ should be investigated.

Thirdly a deemed joint employment status should be considered as a serious

option.

The first suggestion would be to revisit the proposal by Stewart (2002). In his

article Redefining Employment? Meeting the Challenge of Contract and Agency

Labour, Professor Stewart calls for an accurate definition of ‘employment’ that

would side-line those who are not genuinely in business for themselves. He also

provided a detailed submission to the House of Representatives Standing

Committee on Employment, Workplace Relations and Workforce Participation and

to the federal government’s discussion paper, “Proposals for Legislative Reforms

in Independent Contracting and Labour-hire Arrangements” where he detailed a

‘proposed definition of employment’. Stewart maintains that for: -

“contractors who may use entities to trade through, but where they cannot

justify being a ‘genuine business’ for taxation purposes i.e. where the


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contractor is controlled and integrated by the host, is not economically

independent, and whether the contractor cannot delegate or whether the

contractor has business premises, then their status as a contractor should

be disregarded and they should be deemed to be employees”.

A second initiative would be to provide a clear definition of “dependent

contractor”, so that these workers could function as casual contractors. In an

indirect relationship they would become on-hired employees of the agent, and in

a direct relationship they would become casual employees of the host. They

would enjoy the flexibility that was seen to be important to them in this research

yet they would receive all of the same employment conditions as casual

employees and they would avoid the confusion that surrounds them at present.

A third option would be to deem dependent contractors as being jointly

employed by both the agent and the host whether they operate via an entity in a

direct or indirect manner or not. Joint employment would pose many new

difficulties in terms of the payment of wages and the responsibilities for the

collection and payment of taxation and superannuation. However, joint

employment would force both the hosts and the agents to work together to

ensure that the contractors do not slip through the cracks of the legislation, in

much the same way as the Model Work Health and Safety Act (2010) laws

(Australian Government, 2006) now legislate that the hosts and the agents are

jointly responsible for protecting the contractors’ safety.

The system for hiring contractors in New Zealand was similarly troubled by

confusion and uncertainty until the ‘Hobbit Law’ was enacted in 2010 to bring

greater clarity to the regulatory environment in the film industry. The law change

made it clear that the status of a contractor or an employee is to be defined

based upon the decision they make at the start of the relationship, and that is

how it remains (Wilkinson, 2010). Interestingly, not only did this give the

contractors and employees clarity, it also allayed fears from investors that they

were not going to experience delays or long drawn out court cases that would


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potentially delay a film’s progress should the definitions of the workers be in

doubt. This approach partially resolved the issue for the New Zealand film

industry as on one hand it defined who was a contractor and who was an

employee, but it left the contractors to operate as they had previously operated

if they chose that option at the outset. One host in this research during his

interview suggested a similar approach commenting, “the grey areas [in Australia]

should be left grey”. He clearly did not want the Australian system to change.

Even though joint employment has been operational in the United States

since the 1930s (Wheelwright, (2004), when this topic of joint employment was

discussed with the actors during the interviews, most of them felt that this was an

unattractive proposition, but this must be taken in context, as any suggestion of

the contractors being employed was seen as a negative development by most of

the actors. Only those actors who were aware of the confusion within the CTR

suggested that joint employment might be a better option than the present

system.

Determining a precise definition of a dependent contractor as suggested by

Stewart (2002) would not only remove confusion, but it will also eliminate sham

relationships and the potential penalties for all actors. It will also enable better

management, as there will be a clear understanding of the actors’ liabilities and

responsibilities thus eliminating the doubling-up of the purchasing of expensive

insurances and the potential abuse of power within the relationship. Eliminating

confusion will also clearly define which actor should be responsible for the

contractors’ taxation insurances, superannuation and day-to-day management. It

will also allow legislators to create relevant legislation, and the peak bodies to be

fully aware of the engagement conditions that affect their future placements of

contractors. Lastly, removing confusion from within the CTR will also provide a

platform from which to research an accurate theory to predict the contractual

tripartite relationships’ behaviour.


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This synopsis of the wider contextual data demonstrates the level of

confusion that silently exists within the CTR with all three actors trying to achieve

their own goals without exposing the true nature of the potential employment

relationships (and penalties) that may exist within it. The hosts do not want to be

seen as the employers of the contractors, the agents do not want to upset the

hosts, as their business depends upon them, and the contractors simply want an

income stream and a flexible life style. Consequently, it appears that the actors

within the CTR will remain confused until the topic is aired and openly resolved.

This exploratory research has provided a contribution to the knowledge of

how the CTR functions in the white-collar technical sector of Australia’s

engineering, construction, mining and IT sectors. It has not only shown that the

actors of the CTR are confused within and across many topics, but it has also

exposed that the actors of the CTR have many differences of opinion in relation to

which actor is responsible for the contractor’s employment (or engagement) or

the contractor’s overall management and liabilities.

The research also indicates that the three theories that were used to inspect

the topic i.e. agency theory (Eisenhardt, 1989), psychological contract theory

(Guest, 2004) and the theory of power (Ranjan & Zingales, 1997), were all only

partially able to predict the complexity of the CTR. Adding the third actor into

the relationship and then trying to use theories that have traditionally been used

to predict bipartite relationships resulted in the three theories being of use only if

one of the three actors took a neutral position and hence returned the CTR to a

bipartite relationship. Indeed most sociological theories do not adequately explain

a three-dimensional relationship.

The wider contextual data that was gleaned from the interviews and surveys

provided a rich source of information that allowed the author to witness the

contractors’ challenges in attempting to provide a well-paying professional

technical service to their hosts whilst maintaining a flexible lifestyle.

Unfortunately, the findings also suggested that the legislation surrounding their


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engagement was not in line with their circumstances. This resulted in some of the

actors deliberately shamming by constructing their relationships to avoid taxation

and employment liabilities to improve their incomes.

As recent as July 29 2017 Mr O’Connor, (the Labor workplace relations

spokesperson) was quoted in ‘The Weekend Australian’ by Mr Hannon, the

Workplace editor, stating that “Federal Labor was devising a package of changes

to the nation’s workplace laws …including a crackdown on sham contracting,

where people pretend someone is a company when in fact the real relationship is

an employment one.” Mr O’Connor also stated, “Further changes were needed as

the Fair Work Act had not kept pace with changes in the labour market.”

(Hannon, 2017). This comment supports the thrust of this thesis, but it also

highlights that this topic may have a political aspect, which may hinder any true

reforms and therefore may not resolve the actors’ uncertainties in the short term.

6.4 LIMITATIONS

The current research was limited by a number of factors. Firstly because of

the limited response to the surveys it was felt that the overwhelming volume of

the actors within the CTR was perhaps reluctant to expose their potentially

wrongful engagement status resulting in them being unwilling to participate in the

surveys.

Secondly, as detailed above the contractors were unsure when they were

interviewed as to whether they were employees of the hosts or the agents, or

true contractors. The hosts were doubtful as to whether they were employers or

clients of the contractors, and the agents were unsure if they were intermediaries

or employers of the contractors. This confusion tainted some of the responses to

the interview questions and the surveys resulting in the theories that were used to

inspect the relationship i.e. agency theory (Eisenhardt, 1989), psychological

contract theory (Guest, 2004), and the theory of power (Ranjan & Zingales, 1997),

being only partially applicable to describe or predict the nature of the

relationship. For example, agency theory (Eisenhardt, 1989) which showed clearly


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that all three actors felt that there was asymmetric information, but when this

comment is reviewed in the context of the above confusion, the contractors may

have felt justified by not passing on certain information if they thought that they

were providing a consulting service and thought that they were truly independent.

Similarly, the hosts and agents may have treated the contractors as consultants

and equally felt that they did not need to pass on certain information that would

normally be passed to an employee. Again, the actors’ responses to the questions

in relation to their goals, risk profiles, psychological contracts or loyalty may have

been similarly affected. A third limitation was due to the fact that the

contractors are paid by the hour and as the author had worked in this

environment for many years, the author was cognisant that the contractors were

reluctant to take time out of their well-paid work to assist the research.

6.5 IMPLICATIONS FOR FUTURE RESEARCH

This exploratory research has provided the groundwork and a platform for

future research to drill down and inspect many of the features of this interesting

phenomena and where possible to create a new CTR theory that will predict its

behaviour. In order to address the confusion that is incumbent within the

relationship it is also recommended that the legislation that surrounds the CTR be

updated to remove all aspects of confusion within it. To further that end a White

Paper will be created outside of this thesis and forwarded to the Australian

Government to inform them of the findings of this thesis with a hopeful view that

the Government will adopt the authors recommendations for change to the

legislation, allowing a definition of a dependent contractor to be created so that

confusion can be eliminated from the CTR. Unfortunately, the implication of

eliminating confusion by converting thousands of dependent contractors into

casual employees may not sit well with the contractors or the hosts who could

lose flexibility and income i.e. the very reasons that they are in the CTR.

This research has provided a contribution to the body of knowledge in

relation to the operation of the CTR in Australia’s white-collar engineering,


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construction, IT and mining sectors and indeed wherever high skilled white-collar

contractors operate via an entity within a CTR.

6.6 FUTURE RESEARCH AND GENERAL COMMENT

The Odco case (Troubleshooters Australia, 2006) (see Appendix B) broke the

employment paradigm mould in Australia in 1989, with the residing judge Mr

Justice Woodward determining “that contractors were not employees of anyone”.

This decision, along with the support from the decisions in the Stevens v Brodribb

case, and the Hollis v. Vabu case have resulted in the staggering growth of

contract work and a number of flexible work arrangements throughout Australia

where people can now exchange their labour for reward without being technically

employed (Johnstone et al., 2012), i.e. in supply chains, franchises, bailment and

CTRs.

In 2006 the Howard government enacted the Independent Contractors Bill

(2006), and formally enshrined for the independent contractors a ‘freedom from

workplace regulations’ thus allowing them to legally enter into commercial

arrangements for their labour. Unfortunately, the Act appears to have achieved

little, as contractors were entering into commercial contracts well before the

enactment of the Act, and they continue to do so in today’s market, albeit with

little change in relation to the confusion that surrounds their

employment/engagement status and their incumbent liabilities.

This thesis has not only shown that the actors of the CTR receive many

benefits from being engaged within a CTR, with thousands of them enjoying a

more flexible life-style, reduced overheads, improved remuneration and reduced

taxation, however, it has also underlined that the actors of the CTR are confused

regarding many important topics of the CTR and that they hold different opinions

in relation to those topics, i.e. employment v engagement, insurances, taxes,

liabilities, and superannuation. Furthermore, it has shown that they also

experience potential moral hazards, strained psychological contracts and

imbalanced power relationships.


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As mentioned in Chapter Two the results of the current review indicate that

future research into psychological contract theory should include research into

the engagement of independent and dependent contractors in the white-collar

technical and IT sectors, with a multiple foci to encapsulate the CTR. Research is

needed to explore spillover and breach issues, plus the moderating or mediating

effects of control that might lead to multi-agency relationship confusion. This

research will also enable the actors of the CTR to understand their roles more

fully, eliminate any financial risk associated with the CTR and eliminate any

wrongful influences from any of the actors who try to control the CTR relationship

through the use of power.

Consequently, the legislators need to revisit the 80/20 rule under the

Alienation of Personal Services Income Act 2000 (see Appendix D) to tighten the

definition of a contractor and also to add a clause to the ‘unrelated client test’ to

stop contractors swapping agents but remaining with the same host to continue a

contract. This activity circumvents the intent of the present clause.

The language of the decision tool (see Appendix C) which is provided by the

Australian Government (2017) to show the differences between an employee and

a contractor need tightening to stipulate accurately, without room for

misinterpretation, the functions of the employees and contractors. Only two

examples are given below.

Example 1. See Appendix C, col 2 para 1. “The worker (contractor) can

subcontract/delegate the work…” and example 2, in para 2. Appendix C col 2

‘Basis for payment’ reads “the worker (contractor) is paid for a result achieved

based upon a quotation…”

During the authors 28 years of experience in the industry the contractors

were not seen to be allowed to subcontract (as they are appointed for their own

skills) and secondly, quotes were not seen to be prepared or submitted by the

white-collar technical contractors to their hosts or agents.


194

The peak bodies i.e. RCSA and ITCRA would benefit from performing more

research into this area so that they can accurately inform their agents, hosts and

contractors of the correct employment or engagement strategies. Similarly, the

unions should make themselves aware of the topic as the CTR is rapidly spreading

across the disciplines into both brown and blue-collar operations.

Lastly academic researchers would also benefit from being more involved

with this topic as the new way of flexible working is having an effect on

worldwide labour markets. Healey et al. (2017 p. 232), state that “The ‘gig

economy’ has emerged rapidly as a form of service delivery that challenges

existing models, labour-management practices, and regulations” and it is

suggested by (Chung, 2015) that freelance work in Australia is becoming

increasingly popular in many administrative and non-technical industries with

modern agency style organisations such as ‘Upwork’, ‘Freelancer’, ‘Airtasker’, ‘99

designs’, ‘Expert360’, ‘Vygo’ and ‘Uber’ all offering freelance work where the

above agents act for a flexible workforce in contractual tripartite relationships.

It is therefore important for all of the actors who engage in a CTR (present

and future) that the topic of confusion be resolved and removed from the CTR so

that the actors can operate with impunity and with a clear understanding of

exactly how the CTR should function.


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APPENDICES APPENDIX A

Landmark Cases

1.0 ODCO RULING. BUILDING WORKERS INDUSTRIAL UNION OF AUSTRALIA

AND ORS V ODCO PTY LTD (1991) 29 FCR 104.

The “triangular contracting” arrangement which was the subject of the High Court appeal in the

‘Quest’ decision reflects what has become known as the “Odco” system of contracting. The

Odco system is a method of engaging workers through commercial contracts (contracts for

services) as opposed to employment agreements (contracts of service). Under the system, there

is an interposed third entity and as such, there is no direct contractual relationship between the

worker and the person or entity for whom or which the work is performed. The Odco system is

now licensed Australia wide by Labour Force Australia Pty Ltd.

Until now, the legitimacy of this type of arrangement had the endorsement of a 1991

decision of a Full Bench of the Federal Court of Australia in “Building workers industrial union of

Australia and ORS v Odco Pty Ltd (1991) 29 FCR 104”, (from which the “Odco” system takes its

name).

The brief facts were that Odco Pty Ltd (Odco) supplied contract carpenters, labourers,

shop-fitters and other construction workers to the commercial building industry in

Melbourne. The workers supplied were self-employed contractors and not employees of either

Odco or Odco’s client builders.

Odco met with opposition from building unions, which opposed Odco workers from

entering building sites. Odco brought proceedings in the Federal Court against the then Building

Workers Industrial Union (BWIU) (now the CFMEU). That action alleged that the union had

breached section 45D of the then Trade Practices Act 1974 (Cth), in that their actions in

requiring builders to remove Odco contractors from building sites were secondary boycotts. The

core decision, which the Federal Court was required to make, was whether, at common law,

Odco workers were contractors or employees.

The Court determined that the Odco workers were contractors and not employees of

anyone. The BWIU appealed the decision, however, the Full Federal Court unanimously dismissed

the appeal. The BWIU then sought special leave to appeal to the High Court. Special leave was

unanimously refused.”


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2.0 STEVENS AND BRODRIBB CASE

FindLaw Australia provided the following synopsis of the Stevens and Brodribb case.

“The matter of Stevens v Brodribb Sawmilling Co Pty Ltd laid the groundwork in

establishing the test for determining the working relationship of a contractor and an employer

and the test is multi-pronged. First, the whole of the relationship is to be considered and

secondly, the level of control which is exercised between the parties is also an essential element.

In Stevens v Brodribb, Mason J observed:

“… the existence of control, whilst, significant, is not the sole criterion by which to gauge

whether a relationship is one of employment. The approach of this court has been to regard it

merely as one of a number of indicia which must be considered in the determination of that

question… Other relevant matters include, but are not limited to, the mode of remuneration, the

provision and maintenance of equipment, the obligation to work, the hours of work and provision

of holidays, the deduction of income tax and the delegation of work by the putative employer…

control is not now regarded as the only relevant factor. Rather it is the totality of the

relationship between the parties which must be considered.” The test established from Stevens v

Brodribb suggests that when determining the nature of the working relationship, is heavily

reliant on the overall circumstances of the situation as well as control. Additionally, it should

also be emphasised that the substance of the contract also plays an important role in establishing

whether or not a worker is an employee or independent contractor.” (FIndlaw Team).

3.0 HOLLIS v VABU CASE

“Hollis v Vabu, was a matter involving an unidentified bicycle courier sporting a jacket

with the words ‘Crisis Couriers’ – a company owned and operated by Vabu. The courier struck

Hollis while performing his or her duties causing injury to the plaintiff. Vabu argued because the

contracts signed by the riders were for contracts for services, meant that the couriers were

independent contractors, therefore, he was not liable for the injuries suffered by Hollis.

Although the riders of ‘Crisis Couriers’ supplied their own bikes and paid for any expenses

associated with their bikes out of their own pockets, the High Court found that the courier who

struck Hollis was indeed an employee, and that Vabu was liable due to the fact that:

• no special skills or qualifications were required to do the job;

• there was no prospect of freelancing;

• there was stringent rules concerning attendance and assignment regarding the roster;

• the couriers could not refuse work;


197

• the couriers had uniforms and had to conform to a dress code;

• there was no scope to bargain for rates, and there were identifiable rules relating to annual

leave and requests for leave.

In a joint judgment, the High Court said:

“… the relationship between the parties, for the purposes of this litigation, is not to be

found not merely from these contractual terms. The system which was operated thereunder and

the work practices imposed by Vabu go to establishing the totality of the relationship between

the parties; it is this which is to be considered” (Findlaw Team).

4.0 NGUYEN v THEISS CASE

“Nguyen, a process worker, was initially hired directly by Thiess Services Pty Ltd (Thiess),

which usually obtained most of its workers through ANT Contract Packers Pty Ltd (ANT), a labour-

hire corporation. Shortly after commencing work, Nguyen completed paperwork purporting to

make her a casual employee of ANT. She was dismissed after two and a half years’ work,

allegedly due to her pregnancy. Nguyen claimed against both ANT and Thiess. The NSW Industrial

Relations Commission held that Nguyen was an employee of Thiess, because Thiess exercised both

legal and practical control over her. Thiess controlled the shifts she worked, decided the work

she was permitted to perform, and exercised the right to dismiss her. The fact that Thiess hired

Nguyen directly rather than her being referred by ANT strongly favoured the finding of an

employer/employee relationship between Thiess and Nguyen. The commission raised the

possibility that Thiess and ANT might be “joint employers” of Nguyen, a concept that is common

in other jurisdictions such as the USA, but which is only beginning to develop in Australian

jurisprudence” (Wheelwright, 2004).


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APPENDIX B

Table 56

International penetration of agency workers as a percentage of the total country workforce

EUROPE (2006)

Agency workers as % of total

Total workforce Agency workers

Austria 1.50% 3,928,200 58,923

Belgium 2.10% 4,264,000 89,544

Czech Republic 0.70% 4,828,100 33,769

Denmark 0.80% 2,738,000 21,904

Finland 0.70% 2,443,500 17,104

France 2.40% 24,769,800 595,475

Germany 1.30% 37,378,900 485,925

Hungary 1.40% 3,930,000 55,020

Ireland 1.50% 2,038,600 30,579

Italy 0.70% 22,988,200 169,917

Netherlands 2.50% 8,260,000 206,500

Norway 1.00% 2,353,000 23,530

Switzerland 1.50% 4,051,000 60,250

United Kingdom 4.50% 28,337,100 1,275,169

European AVERAGE

1.80%

REST OF WORLD (2006)

Argentina 0.90% 10,040,500 90,364

Brazil 0.95% 84,596,000 803,662

Chile 1.30% 6,411,000 83,343

Israel 5.00% - -

Japan 2.10% 63,820,000 1,340,220

South Africa 0.30% 23,151,000 69,453

USA 2.05% 144,427,000 2,959,309

AUSTRALIA* (2010)

9.80% 11,225,000* 1,100,050


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APPENDIX C

Table 57

Differences between employees and contractors. (Australian Government, 2006).

Decision tool as supplied by the Australian Government website

https://www.ato.gov.au/business/employee-or-contractor

Employee Contractor

Ability to subcontract/delegate: the

worker can't subcontract/delegate

the work – they can't pay someone

else to do the work.

Ability to subcontract/delegate: the

worker can subcontract/delegate the

work – they can pay someone else to do

the work.

Basis of payment – the worker is paid

either:

for the time worked

a price per item or activity

a commission.

Basis of payment: the worker is paid for

a result achieved based on the quote

they provided.

A quote can be calculated using hourly

rates or price per item to work out the

total cost of the work.

Equipment, tools and other assets:

your business provides all or most of

the equipment, tools and other

assets required to complete the

work, or

the worker provides all or most of

the equipment, tools and other

Equipment, tools and other assets:

the worker provides all or most of the

equipment, tools and other assets

required to complete the work

the worker does not receive an

allowance or reimbursement for the

cost of this equipment, tools and other

https://www.ato.gov.au/business/employee-or-contractor/difference-between-employees-and-contractors/ability-to-subcontract/delegate/

https://www.ato.gov.au/business/employee-or-contractor/difference-between-employees-and-contractors/ability-to-subcontract/delegate/

https://www.ato.gov.au/business/employee-or-contractor/difference-between-employees-and-contractors/basis-of-payment/

https://www.ato.gov.au/business/employee-or-contractor/difference-between-employees-and-contractors/basis-of-payment/

https://www.ato.gov.au/business/employee-or-contractor/difference-between-employees-and-contractors/equipment,-tools-and-other-assets/

https://www.ato.gov.au/business/employee-or-contractor/difference-between-employees-and-contractors/equipment,-tools-and-other-assets/


200

assets required to complete the

work, but your business provides

them with an allowance or

reimburses them for the cost of the

equipment, tools and other assets.

assets.

Commercial risks: the worker takes

no commercial risks. Your business is

legally responsible for the work done

by the worker and liable for the cost

of rectifying any defect in the work.

Commercial risks: the worker takes

commercial risks, with the worker being

legally responsible for their work and

liable for the cost of rectifying any

defect in their work.

Control over the work: your business

has the right to direct the way in

which the worker does their work.

Control over the work: the worker has

freedom in the way the work is done,

subject to the specific terms in any

contract or agreement.

Independence: the worker is not

operating independently of your

business. They work within and are

considered part of your business.

Independence: the worker is operating

their own business independently of

your business. The worker performs

services as specified in their contract or

agreement and is free to accept or

refuse additional work.

https://www.ato.gov.au/business/employee-or-contractor/difference-between-employees-and-contractors/commercial-risks/

https://www.ato.gov.au/business/employee-or-contractor/difference-between-employees-and-contractors/commercial-risks/

https://www.ato.gov.au/business/employee-or-contractor/difference-between-employees-and-contractors/control-over-work/

https://www.ato.gov.au/business/employee-or-contractor/difference-between-employees-and-contractors/control-over-work/

https://www.ato.gov.au/business/employee-or-contractor/difference-between-employees-and-contractors/independence/

https://www.ato.gov.au/business/employee-or-contractor/difference-between-employees-and-contractors/independence/


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APPENDIX D

Alienation of Personal Services Income Act 2000.(80% rule, or 80/20 rule)

Association of Professional Engineers, Scientists and Managers, Australia (APESMA)

provided the following explanation to the 80/20 rule: -

If less than 80% of the Personal Services Income (PSI) comes from one source, the business

will be a Personal Services Business (PSB), and the PSI rules will not apply to that income if the

business can pass any one of the four [following] tests.

1. Result test: To satisfy the results test: -

• at least 75% of the income must be for producing a result:

• the entity or individual must supply the plant and equipment needed to perform the

work to produce that result; and

• the entity or individual must be liable for the cost of rectifying any defect in the

work.

2. Unrelated clients test: To satisfy the unrelated clients test: -

• the business must obtain its income from two or more entities that are not

associated with each other or the business and the business must be effectively

offering its services to the public.

The Commissioner has said that it is sufficient if those services are available to the public

and are made known simply by word of mouth. However, this is not what the legislation says. For

the test to be passed, the individual or entity must be making offers or invitations to the public

at large, or a segment. This appears to require positive or active conduct by the individual or

entity, not just passive reliance on the recommendations of others.

3. Employment test: To satisfy the employment test: -

• the business must employ some person other than the person to whom PSI would be

attributable if the rules applied and that person must do at least 20% of the

principal work of the business during the year or

• the business must have an apprentice for at least six months of the year.

4. Business premises test: To satisfy the business premises test, the premises occupied

by the business must be: -

• mainly used to conduct activities from which the PSI is gained;


202

• used exclusively by the individual or entity (in other words, not shared with anyone

else);

• physically separate from any premises that the individual or entity (or an associate)

uses for private purposes; and “apt for the purpose

• physically separate from any premises of an entity for whom the work is done or

from an associate of that entity”.” Rickard (2009).


203

APPENDIX E

Sample of the formal inquiries and investigations since 2000

Jan-00 Review of Business Taxation. A Platform for Consultation. (The Ralph Report).

Sep-00 Inquiry by NSW Government, Labour-hire Task Force.

Jul-00 Alienation of Personal Services income (APSI) legislation was enacted.

Sep-01 Self-employed in Australia: Incidence and Characteristics. Productivity Commission.

Aug-02 The Cole Royal Commission’s Interim Report (Cole Royal Commission Interim Report) was published.

Feb-03 The Cole Royal Commission’s Final Report was presented to the Governor-General. Sham contracting was addressed in Volume 9 Reform – National Issues (Part 3) (paragraphs 261-321).

Jul-03 Productivity Commission Inquiry – National Workers’ Compensation and Occupational Health and Safety Frameworks.

Dec-03 Inquiry into Labour-hire Employment in Victoria.

Dec-04 Employment, Workplace Relations and Workforce Participation Committee to inquire and report on independent contracting and labour-hire arrangements across Australia (2004 House of Representatives Inquiry).

Mar-04 Productivity Commission Report, National Workers’ Compensation and Occupational Health and Safety Frameworks.

Jun-05 Discussion Paper: Proposals for Legislative Reforms in independent Contracting and Labour-hire Arrangements. Department of Employment and Workplace Relations.

Jun-05 Report of the Inquiry into Labour-hire Employment in Victoria (Victorian Inquiry) was published by the Victorian Parliament’s Economic Development Committee.

Aug-05 The 2004 House of Representatives Inquiry final report, Making it work: Inquiry into independent contracting and labour-hire arrangements (Making it Work Report), was tabled in Parliament.

Nov-05 Report on Definition of a Worker to Minister for Commerce. (Macken, 2005).

Jun-06 The Independent Contractors Bill 2006 (ICB) and the Workplace Relations Legislation Amendment (independent contractors) Bill 2006 were referred to the Commonwealth Senate’s Education, Employment and Workplace Relations Committee for inquiry (Senate IC Bill Inquiry).


204

Aug-06 The IC Bill Senate Inquiry’s final report, Provisions of the independent contractors Bill 2006 and the Workplace Relations Legislation Amendment (independent contractors) Bill 2006 was tabled in Parliament (Senate IC Bill Report).

Jun-07 Independent contractors Act 2006 (Cth) (IC Act) and sham arrangement provisions in the Workplace Relations Act 1996 (Cth) commenced operation.

Jul-09 Fair Work Act 2009 (Cth) (FW Act) commenced operation.

Feb-10 Senate Standing Committee on Education, Employment And Workplace Relations and the subsequent hearing of that Committee.

Dec-10 Inquiry into Arrangement and the use of Labour-hire in the Building and Construction Industry.

Sep-11 Investigation into The Spread of Casual, Contract and other forms of insecure work in Australian Workplaces. Australian Council of Trade Unions.

Sep-11 Sham Contracting Inquiry. The Australian Building and Construction Commissioner. (ABCC). Leigh Johns. 21 submissions into building and construction industry.

Oct-11 Inquiry into Insecure Work in Australia. ACTU.

Apr-12 Report on Insecure work in Australia. ACTU.

Sep-12 Inquiry into the Operation of Queensland's Worker's Compensation Scheme. Queensland Government.

May-13 Legal Affairs and Community Safety Committee. Industrial Relations (Transparency and Accountability of Industrial Organisations) and Other Acts Amendment Bill 2013. Queensland.

Nov-13 Building and Construction Industry (Improving Productivity) Bill 2013 and the Building and Construction Industry (Consequential and Transitional Provisions) Bill 2013.


205

APPENDIX F

Participant information sheet and consent form – Agent

PARTICIPANT INFORMATION FOR

QUT RESEARCH PROJECT – Survey

– Agent

Who should be deemed responsible for the White-Collar Contractor in a

non-employment tripartite relationship?

QUT Ethics Approval Number 1300000446

RESEARCH TEAM

Principal Researcher: Mr William Dalby, DBA Student.

Principal Supervisor: A/Prof Amanda Gudmundsson Business School. Queensland University of

Technology (QUT).

DESCRIPTION

This project is being undertaken as part of a, Doctor of Business Administration (DBA) for Bill Dalby.

The purpose of this research project is to examine the relationship between the three main participants in a white-collar contractor tripartite non-employment relationship to identify opportunities for intervention that will improve and clarify the relationships within it.

Outcomes of the research are aimed at reducing the confusion that surrounds the responsibilities of all three participants and specifically at improving the occupational health and safety of the contractor.

You are invited to participate in this project because your opinion and experience as an agent operating in the white-collar professional and technical engineering sector is valuable to the research.

PARTICIPATION

Your participation in the project is entirely voluntary and will involve completing an electronic or hard copy survey, which should take approximately 5-7 minutes of your time. The electronic copy can be performed by clicking on this link https://survey.qut.edu.au/f/187201/5748/. If you do agree to participate you can withdraw from the project without comment or penalty at any time. It is not compulsory to answer all of the questions. Only when your approval is given will your comments be used within the study.

Should you be performing the hard copy version then please return only the Consent Form to the address as indicated on the bottom of Page 4.

The survey will only be used for the purposes of this specific research and will be deleted at the

end of the research project.Your decision to participate or not participate will in no way impact

https://survey.qut.edu.au/f/187201/5748/


206

upon your current position.

The questions will be based on a typical Likert scale with questions that will focus upon the relationships and responsibilities with the tripartite relationship.

Here is an example of the type of questions:

1 Which organisation do you think employs the Contractor?

• Contractors entity

• Agent

• Host (Client)

• Combination

• Not sure

2 What are the reasons you engage Contractors?

• Reduced Overheads

• Easier to let them go • Easier recruitment process

3 Where do contractors generally work from

• The contractors office

• Your Office

• A combination

EXPECTED BENEFITS

It is expected that this project may benefit your organisation directly by clarifying the responsibilities of all three participants to the tripartite relationship.

RISKS

There are no risks beyond normal day-to-day living associated with your participation in this project.

PRIVACY AND CONFIDENTIALITY

Your survey responses will be treated confidentially.

Individual and organisational names and any identifying details will not appear on the survey and therefore will not: -

• appear on any transcripts. • appear on any industry related reports. • be revealed in any outcomes of this research.

Only the Research Team, which is also bound by confidentiality agreements, will have access to

the ‘blind’ data. Please note that non-identifiable data collected in this project may be used as

comparative data in future projects or stored on an open access database for secondary analysis.

CONSENT TO PARTICIPATE


207

We would like to ask you to tick the consent box “ I AGREE” (P4) to confirm your agreement to

participate. Alternatively if you do not wish to participate disregard this request.Should you

submit this survey without ticking the “I AGREE” box this will be taken as consent.

QUESTIONS / FURTHER INFORMATION ABOUT THE PROJECT If have any questions or require

further information please contact one of the research team members below.

Mr Bill Dalby 07 3138 2000 A/Prof Amanda Gudmundsson 07 3138 5387

[email protected] [email protected]

CONCERNS / COMPLAINTS REGARDING THE CONDUCT OF THE PROJECT

QUT is committed to research integrity and the ethical conduct of research projects. However, if you do have any concerns or complaints about the ethical conduct of the project you may contact the QUT Research Ethics Unit on 07 3138 5123 or email [email protected]. The QUT Research Ethics Unit is not connected with the research project and can facilitate a resolution to your concern in an impartial manner.

Thank you for helping with this research project. Please keep this sheet for your information.

Please return this page in the enclosed stamped addressed envelope provided.

CONSENT FORM FOR QUT

RESEARCH PROJECT– Agent –

Who should be deemed responsible for the White-Collar Contractor in

a non-employment tripartite relationship?


RESEARCH TEAM CONTACTS

Mr Bill Dalby07 3138 2000 [email protected]

A/Prof Amanda Gudmundsson 07 3138 5387 [email protected]

STATEMENT OF CONSENT

By ticking the confirm box “I AGREE” you are indicating that you:

• Are authorised to speak on behalf of the Owners of your organisation.

• Have read and understood the information document regarding this project.

• Have had any questions answered to your satisfaction.

• Understand that if you have any additional questions you can contact the research team.


208

• Understand that you are free to withdraw at any time, without comment or penalty. • Understand that you can contact the Research Ethics Unit on 07 3138 5123 or email

[email protected] if you have concerns about the ethical conduct of the project. • Understand that non-identifiable data collected in this project may be used as comparative data in

future projects.

I Agree to participate, please tick.

Please return this sheet for the attention of Ms Mona Mendoza, QUT Business School, Level 11 Z Block, Gardens Point: GPO BOX 2434 BRISBANE Queensland 4001 using the stamped addressed

envelope.


209

APPENDIX G

Participant information sheet and consent form – Contractor


QUT RESEARCH PROJECT –

Contractor




RESEARCH TEAM

Principal Researcher: Mr William Dalby, DBA Student


Technology (QUT).

DESCRIPTION




You are invited to participate in this project because your opinion and experience as a Contractor operating in the white-collar professional and technical engineering sector is valuable to the research.

PARTICIPATION

Your participation in the project is entirely voluntary and will involve completing an electronic or hard copy survey, which should take approximately 5-7 minutes of your time. The electronic copy can be performed by clicking on this link https://survey.qut.edu.au/f/187232/2ab6/. If you do agree to participate you can withdraw from the project without comment or penalty at any time. It is not

compulsory to answer all of the questions.Only when your approval is given will your comments

be used within the study.



https://survey.qut.edu.au/f/187232/2ab6/


210




Here is an example of the type of questions:

1 Which organisation do you think employs the Contractor

• Contractors entity

• Agent

• Host (Client)

• Combination

• Not sure

2 What are the reasons you contract?

• Reduced Overheads

• Easier to let them go • Easier recruitment process

3 Where do contractors generally work from


• Host Office

• A combination

EXPECTED BENEFITS

It is expected that this project may benefit you directly by clarifying the responsibilities of all three participants to the tripartite relationship.

RISKS





• appear on any transcripts. • appear on any industry related reports. • be revealed in any outcomes of this research. Only the Research Team, which is also bound by confidentiality agreements, will have access to the

‘blind’ data. Please note that non-identifiable data collected in this project may be used as




211

We would like to ask you to tick the consent box “ I AGREE” (P4) to confirm your agreement to

participate. Alternatively if you do not wish to participate disregard this request.Should you

submit this survey without ticking the “I AGREE” box this will be taken as consent.

QUESTIONS / FURTHER INFORMATION ABOUT THE PROJECT If have any questions or require

further information please contact one of the research team members below. A/Prof Amanda Gudmundsson 07 3138 5387 [email protected]

Mr Bill Dalby 07 3138 2000 [email protected]



Thank you for helping with this research project. Please keep this sheet for your information.

Please return this page in the enclosed stamped addressed envelope provided.

CONSENT FORM FOR QUT RESEARCH

PROJECT –Contractor–









• Are authorised to speak on behalf of the Owners of your organisation.

• Have read and understood the information document regarding this project.

• Have had any questions answered to your satisfaction.

• Understand that if you have any additional questions you can contact the research team.


212

• Understand that you are free to withdraw at any time, without comment or penalty. • Understand that you can contact the Research Ethics Unit on 07 3138 5123 or email

[email protected] if you have concerns about the ethical conduct of the project. • Understand that non-identifiable data collected in this project may be used as comparative data in

future projects.


Please return this sheet for the attention of Ms Mona Mendoza, QUT Business School, Level 11 Z Block, Gardens Point: GPO BOX 2434 BRISBANE Queensland 4001 using the stamped addressed envelope.


213

APPENDIX H

Participant information sheet and consent form – Host


QUT RESEARCH PROJECT – Client –

Who should be deemed responsible for the White-Collar Contractor in

a non-employment tripartite relationship?


RESEARCH TEAM

Principal Researcher: Mr William Dalby, DBA Student.


Technology (QUT).

DESCRIPTION




You are invited to participate in this project because your opinion and experience as a host client operating in the white-collar professional and technical engineering sector is valuable to the research.

PARTICIPATION

Your participation in the project is entirely voluntary and will involve completing an electronic or hard copy survey, which should take approximately 5-7 minutes of your time. The electronic copy can be performed by clicking on this link http://survey.qut.edu.au/f/187202/6980/. If you do agree to participate you can withdraw from the project without comment or penalty at any time.

It is not compulsory to answer all of the questions.Only when your approval is given will your

comments be used within the study.





http://survey.qut.edu.au/f/187202/6980/


214


Here is an example of the type of questions: 1 Which organisation do you think employs the

Contractors entity

• Agent • Host (Client) • Combination • Not sure

2 What are the reasons you engage Contractors?

Reduced Overheads

• Flexibility • Easier recruitment process

3 Where do contractors generally work?


• Your Host Office

• A combination

EXPECTED BENEFITS

It is expected that this project may benefit your organisation directly by clarifying the responsibilities of all three participants to the tripartite relationship.

RISKS





appear on any transcripts.

appear on any industry related reports.

be revealed in any outcomes of this research.

Only the Research Team, which is also bound by confidentiality agreements, will have access to the

‘blind’ data. Please note that non-identifiable data collected in this project may be used as



We would like to ask you to tick the consent box “ I AGREE” (P4) to confirm your agreement to participate. Alternatively if you do not wish to participate disregard this request. Should you submit this

survey without ticking the “I AGREE” box this will be taken as consent.


215

QUESTIONS / FURTHER INFORMATION ABOUT THE PROJECT If have any questions or require further

information please contact one of the research team members below.

Mr Bill Dalby 07 3138 2000 A/Prof Amanda Gudmundsson 07 3138 5387 [email protected] [email protected]



Thank you for helping with this research project. Please keep sheets 1-3 for your information.

Please return this page (with the completed hard copy survey) in the enclosed stamped addressed envelope provided.

CONSENT FORM FOR QUT RESEARCH PROJECT HOST –

Who should be deemed responsible for the White-Collar Contractor in a non-employment tripartite relationship?







Are authorised to speak on behalf of the Owners of your organisation.

Have read and understood the information document regarding this project.

Have had any questions answered to your satisfaction.

Understand that if you have any additional questions you can contact the research team.

Understand that you are free to withdraw at any time, without comment or penalty.

Understand that you can contact the Research Ethics Unit on 07 3138 5123 or email

[email protected] if you have concerns about the ethical conduct of the project.


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Understand that non-identifiable data collected in this project may be used as comparative data in future projects.


Please return this sheet for the attention of Ms Mona Mendoza, QUT Business School, Level 11 Z Block, Gardens Point: GPO BOX 2434 BRISBANE Queensland 4001 using the stamped addressed envelope.


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APPENDIX I

Additional findings

Table 58

Reason to be involved in a CTR


So contracting was just ideal. Short term and I can enjoy the experience spend time there have less responsibility and walk away from it.

It provides the flexibility to let go of them.

A lot of contractors couldn’t give a damn about it [the way they are engaged], they want a job.

It is not about flexibility, Its about finance.

If you have a quick need for specific skills you can go to the market, you can find the contractor. You pay a premium and you get what you want and once it is done it is done. So it’s an easy engagement and an easy completion from an employment relation point of view.

They [the hosts] just don’t want to be involved in all the pay rolling, the superannuation, the payroll tax, all of the other things that are necessary for that person. They don’t have to worry about all the ins and outs and the contractual type arrangements with the person themselves. So we do that for them.

So I think there is flexibility on both sides so it’s really good.

Sometimes a lot easier to mobilise a contractor, direct or indirect to do that type of work and they will go for the duration of the project to site. So sometimes it’s a task they come to do and sometimes it’s a job. So it’s a bit of a combination of those two.

After the GFC everyone changed their attitude again and right now they [the hosts] are saying we’d prefer to take them on contract because they don’t want to go through all these redundancy pay-outs again.

When I was permanent I was losing contact with outside sources and companies. So, I was just brain dead; maybe it is also the money too.

I think a lot of it is because the host can’t get approval for the headcount so they bring them through the backdoor; through procurement.


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I found that it was more flexible for me and the remuneration was much higher. Lifestyle reasons and it’s easier for me to manage my tax obligations and contractors are paid probably 30 per cent more than direct employees.

The beauty of having available is because it does give you that flexibility as it is much easier to mobilise a contractor.

They are a moving workforce. Quick in, and quick out, it is easier to mobilise a contractor.

I started doing this kind of job because I can get more knowledge. in every job that I do I learn more and more.

I suppose it’s easy enough to say well we’re ending your contract.

We can dispense with the contractors with little or no notice.

It allowed me to transition from my previous work as a tradesperson.

Money is a very large motivator.

Because of its transient nature, I learned a lot more by being a contractor than I would have than being an employee.

That is why they are a contractor, they want to make as much money as quick as they can.

The income far outweighs the inconvenience of the flexibility.

We just need somebody for a few days – we use them for very particular purposes like IT.

The freedom to move around it just gave me so much enjoyment. To know that I don’t have to stay at a place for 20 years, if someone ticks me off I know at the end of the project I’m gone, it’s great.

They are a moving workforce. Quick in, and quick out, its easier to mobilise a contractor.

Ah, just for my flexibility. The politics of a permanent role drove me nuts.

I would say that a lot of the time the [hosts] don’t want to accept responsibility, that’s why they do it through an agent.

Well, you have better control.

Lack of opportunity I should say.


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An agency encouraged me. They were making 4-5 times as much as they could [on staff]. It all comes down to money. We are better paid than employees and have the same job security and benefits I prefer flexibility.

I like its transient nature and I learn a lot.

It all comes down to flexibility.


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Table 59

Employment v engagement


No my entity does not employ me. [Who is the employer then?]. My entity.

If the contractors are engaged for more than 12 months then the host is deemed to be the employer.

It is difficult for a judge to decide who the employer is.


Direct supervision goes into that grey area whether someone is an employee or a contractor. We have a contractor who has been here for 18 years; Tell me he is not an employee?

Their entity does employ them, but we consider them our employees, and we just pay an invoice.

Right. Ok, Ahmmm, the paperwork said that the agent employed me but really the host employed me.

Its either the agency or the contractors entity”. “No the agency, the agency.

That’s a conundrum for me. I think.

For us in Human Resources we would prefer to see them [contractors] as employees.

The true employer of the Pty Ltd Co. is the contractor.

We [the host] are the employer.

Errrr. I can’t answer that. Its not us, both the contractors and the host.

The agency employs the contractors, but in a direct relationship we the hosts would have more responsibility but we would not employ them as such.

We are actively involved and as I referenced earlier this is where we need to ensure that the host employer understands that we are the employers of these contractors.


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So when the contractors come through a Pty Ltd Co their company covers them? Host; Yes; ... And when they’re indirect the agency covers them? Host; Yes. In reality though the relationship is with us, but I think it’s a case of bull baffles brains.

I do still feel that for a very simplistic viewpoint they are not employee of the host. Simply because they are employees of the person who pays them even if they have been with the host for 2-3 years.

I don’t know [who employs them] because I suppose I’d have to know more about what employment legally means.

The true employer of the person is the Pty Ltd company of that independent contractor.

When they come through an agency, then we’re paying the agency, so the agency is the employer, not us.

If one of your contractors (Pty Ltd) was working through you at the host’s site and has been there for three years, Would you still feel as though you employed them? Contractor. Yes.

If you asked anyone how do you determine your employer, they’ll say, who pays my wages.

So we consider [ABN and Pty Ltd] our employees.

If they were integrated and controlled by the client 7 days a week, 24/7, they would see themselves being employed by the host.

We don’t identify them necessarily as ours, they don’t wear our hard hats, our shirts, anything like that.


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Table 60

Sham relationships


It was shamming to a certain degree, doing it deliberately, but we were not doing it to avoid tax, we weren't doing anything illegal.

Yea I could see people shamming.

There are employers that do this [engage contractors] for shamming reasons, they use contractors for reasons that are ‘bull…t’, without doubt, and I think it is wrong.

I was an individual masquerading as a business [shamming]. The contracts were sort of like the staff negotiated contract type jobs. A contract rate on staff premises sort of jobs.

If someone was long-term in your organisation being directed and controlled and integrated, and all his work was here, would you think the contractor was a sham contractor? Host; Maybe. I don’t necessary see it as shamming.

The ATO came out about a year ago and said that [the relationship] can be deemed a sham contracting arrangement.

I feel as though the people in the system sham.

We do have some people that we treat like employees, who are actually engaged, as contractors through a company that they own.

We are deemed as the employer, if they [ATO] deem that a particular independent contractor is a sham contracting arrangement.

if we do we treat them as an employee we recommend people like that go through an agency where the employment

You get a lot of people being billed as Pty Ltd.’s and there’s no reason for it. So they’re doing it to in fact avoid tax.


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relationship exists.

Well it was clear that the host was my employer.

In reality the relationship is with us but I think it’s a case of bull…t baffles brains. We try our best to keep a distance from being seen to be an employer but it doesn’t work.

I just don’t think that they [ATO] have got balls to do anything about it.


We try our best to keep a distance from being seen to be an employer, but it doesn’t work. It is very grey, very very grey.

it really is just is a tax dodge from my perspective.

Let’s say if you were on average of a year, in one client and they are controlling you and integrating you, you never see the agent, not that often, and you are not there to produce a result so why are you not deemed an employee of the host? It’s difficult to answer.

After a period of time, if you look like, and smell like…[an employee] then I don’t know, then you probably are [an employee].

The host doesn’t 'want' to directly employ those people.


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I’m sitting here in the office drinking their coffee, using all their systems. I’ve developed some of their systems. I mean it could be construed as that [being an employee].

All of it is about paying less tax. If you are doing it consciously to tax minimise the accountants say to you that it is alright, as long as you are doing it within your rights, but I reckon the lines are a lot blurrier than that.

I’ve recently self-assessed again and I’ve had legal opinion on it that suggesting that I’m not an employee.

Just before I retired they might have caught up with me.


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Table 61

Responsibility


When I operate in a direct manner I am basically their employees so I would think that they are responsible for me.



We would consider the agent to be responsible for the contractor.


For direct or indirect contractor, who is responsible for professional indemnity, public liability, WorkCover, tax? Agent. Um if it’s a PTY LTD they are.


This has been a bone of contention for quite some time, we feel that the contractor’s entity is responsible for the contractor. The agent does have a responsibility…it really is just a tax dodge from my perspective.


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Who is responsible? [Contractor] Errrrr,I can’t answer that. It’s not us. We know the host is responsible [for our casuals] but we don’t assume anything.

The contractor is responsible for the professional indemnity, public liability, WorkCover all those sort of legal things, taxation.

Our opinion is that we are responsible for the insurances but we don’t employ them. We’ve been forced to do that. We see the entity as being responsible for its employees because the independent contractor is running a business and so they have employees - which in most cases is just the director. But in an indirect relationship the agent does have a responsibility, and the host is responsible for directing the work. They should be employees of the host.

In a direct relationship the host would be responsible for PI, Public liability and WorkCover and taxation. In an indirect relationship then the agent.


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Table 62

Insurances


The agent covered me for WorkCover but the hosts [in a direct relationship] never did. I purchased Public liability but never had Professional Indemnity (PI), you need a degree for that.

The agent should provide PI, Public liability and WorkCover, that’s where it gets messy, don’t quote me on this but I don’t know.

Our opinion is that we are responsible for the insurances but we don’t employ them. We’ve been forced to do that.

I don’t know, No I don’t have PI. WorkCover… generally the agent would do that, but I don’t know who would cover the insurance part.

I don’t know. So long as the insurances are in place we don’t mind if it is the agent who has sorted it or if it’s the contractor.

No, the liability lies upon their [contractor] entity to have the relevant insurances in place. The host doesn’t offer PI, Public Liability WorkCover or taxation.

In a direct relationship the host would be responsible for PI, Public liability and WorkCover and taxation. In an indirect relationship then the agent.

I would not be surprised if there are a few contractors floating around who joined us 15 years ago who are not appropriately insured.

The agency looks after the insurances. I’m not 100% sure, WorkCover is definitely the agency but I would have to confirm that.

I’m not sure, actually I’m not too sure.

Yes, we treat them as employees of a different organisation but yet we are willing to take on professional indemnity for them, based on our legal advice.

If they did not have their own insurances we would treat them as a PAYG. [employees].

We used to pay for insurance but all the agents used to carry it as well. I don't know.

Well the agent will normally have that and look after all that.

The host doesn’t offer P.I., P.L., or WorkCover.

P.I. Never got it. You have to have a degree for that.

WorkCover is definitely the agency. I’m not 100 per cent sure.

The individual is responsible.

The host would have to carry the P.I. because they are in charge of the design.

The contractors were responsible for their own insurances.

I’m not going to leave myself exposed. If they can’t demonstrate that it’s the right level of insurance, I will insure on top of it.


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In an indirect relationship the agent covered me for WorkCover. In a direct relationship the hosts never did. I purchased Public liability but never had Professional Indemnity (P.I.).

He spends so much of his time here, WorkCover would be our responsibility.

Our opinion is that we are responsible for the insurances but we don’t employ them. We’ve been forced to do that

For direct or indirect contractors, who is responsible for professional indemnity, public liability, WorkCover, tax? Agent. Um if it’s a PTY LTD they are.

The contractor is responsible for the professional indemnity, public liability, WorkCover all those sorts of legal things, taxation.


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Table 63

Tax general


But you were always worried that the tax department was going to look too hard and you’d be dead in the water then- they may well say you should have been taxed and an employee of the host.

If they [tax office] did a solid audit they most likely will come up to us and say we have some contractors that should have been employees.

And the employees could not get the same benefits and so they’re [contractors] doing it in fact to avoid tax… and I don’t think the authorities have the strength to do anything about it.

“[Wife of contractor] The other way we could get it was that I could be paid a personal wage, or get the neighbour down the road to do all the banking, paperwork, all his tax, everything that I did. [Husband contractor] - to be dishonest?

We pay payroll tax on the contractor but he pays his own tax, well I don’t know if we withhold tax from his company but I do know he invoices accounts payable.

Its just a tax dodge from my perspective.

[Wife of contractor] You would be stupid if you didn’t take advantage of the policies.


We pay payroll tax on very single person who is deemed an employee including Pty Ltd entities as we recognise them as employees.

Who looks after your taxation? [contractor] Myself: So the agent doesn’t do your tax? [contractor] Ah, no….. the agent has my no she gives me the um..payslip.

Most of my Pty Ltd contractors are flouting the professional services and the 80/20 rules … they do income splitting with the ‘misses'.

I was lucky over the last five years as I had constant employment with one host; and the tax department didn’t look at us.


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Table 64

Taxation 80/20 rule


We’ve actually folded a few other additional services into our company structure which actually allows us to comply with the 80-20 rule.

We have contractors who have been here for 18 years, so tell me that the 80/20 doesn’t apply to them if they work 40 hours per week for 10 years with us? (Rhetorically).

Most of my Pty ltd contractors are flouting the professional services and the 80/20 rules.

Sometimes I’ll have a long-term contract but generally, I meet the 80/20 rule.

Is someone is contracting long-term then it is usually a worry for them on tax, like the 80/20.

I think there is a lot of confusion about the 80/20 rule from a contractors perspectives.

My average contract length would be 3 years. I had a problem once and I had to change agent but stay with the same host. Many, many people working like me and I know some of them have spent up to ten years in one client office and they have always been contractors.

Yes we are aware of it.

I perceive that we’re involved in any duplicity with some of these Pty Ltd or ABNs who choose to breach the 80/20.

Over 30 years, I would say good 70% of contracts would be longer than a year. 80/20 rule didn’t apply to me so I was able to keep on doing the job. My accountant probably would have sorted it out for me without me knowing because he is a good bloke. He doesn’t want to see me getting in any trouble.

I can’t for the life of me understand how the independent contractors somehow managed to bluff the ATO and the 80/20 rule.

Yes, I had long contracts in lots of places but I didn’t take any notice of the 80/20 rule I just did the job. I would swap over agents but remain with the same host. It would have been dodgy if they had caught me.

The 80/20 rule is not my concern.


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The 80/20 rule was always a worry. We were always worried that the tax department was going to look too hard at us and we'd be dead in the water, as they could have said we were employees of the host.

The other way that we could get around it [the income splitting] was instead of paying me [wife of contractor] a personal wage was to get the neighbour down the road to do all the banking, bookwork, paperwork, all his tax, everything that I did. Contractor; To be dishonest. Contractor's wife; Then he [contractor] could supposedly pay the neighbour and that was the way around it. And I’ve heard, I don’t know for a fact, that a lot of contractors did that. Contractor: Have a ghost employee.

Do you still have to self- assess, tell the ATO how much you have earned per year. Is that the part of the tax regime? Contractor. No, not that I know of!

The 80/20 tax rule forced us to incorporate.


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Table 65

Confusion


The biggest areas of confusion are superannuation, tax, workplace health and safety, liabilities, the whole thing. There’s always doubt about what you are doing and what you have covered.

Its not very clear, there is a lot of grey I think.

No, no the system is not well understood. There’s a lot of host employers out there that just don’t understand how all this works.

It’s a definite grey area and I don’t know how to answer that.

Confidentially many of the relationships are close to the wire.

It is I know somewhat confusing arrangement.

I think there is a lot of confusion from the contractors’ perspective relating to the 80/20 tax legislation.

Yes, there is confusion it’s the same everywhere.

I am very confused even though I have been in the business for 23 years.

The agency is realistically my employer in terms of general spectrum. But the host is in a direct manner.

it’s definitely a grey area. There’s a lot of grey area in the system yeah.

There is no employment between the agent and the independent contractor and the host and the independent contractor.

My entity is my employer. So the agency is the employer, as we haven’t contacted to the contractor. We have reached an agreement with the agency. We haven’t reached an agreement with him and his entity. But we would treat him like an employee if he did something wrong.

Errrrr, I can’t answer that. I don’t see us as being an employer because they are independent contractors. Yes. It’s a grey area.

The host employs me. It’s a tricky one, I think there is a bit of responsibility with everyone but we [host] wouldn’t have any responsibility, the relationship is between the agent and the contractor, so the agent employs the Pty Ltd Co –they don’t though do they: but they should.

Well, their entity does employ them, but we consider them an employee.


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Well, clearly it was the host who I was working for who was my employer, even though I operate a Pty Ltd entity.

We are the employer [of the direct contractor].

I think it is confused. So we consider [ABN and Pty Ltd] as our employees.

I had a business name and I used it but I did not employ myself, it was just a business name.

We have more responsibilities and obligations however they are not employees of us [the host], until after 12 months when they become our employees.

The client is deemed to be the employer.

If the agent is not in the relationship then the host is the employer.

Yes and no. It depends upon how much work the contractor does for us. If the contractor breaks the 80/20 rule then I think he would be thought of as one of our employees.

I don’t think they are employees of the host simply because they are employees of the person paying them. It is an issue and I would love to see some research on it.

I am a director of my entity. I receive wages from my entity but the host still employs me.

We treat them like employees.

The host doesn’t want to directly employ those people [contractors]. They just don’t want to be involved in all of the pay rolling, the superannuation, the payroll tax, all of the other things that are necessary for that person.

Its definitely a grey area and I don’t know how to answer, but even though I have a ‘Pty Ltd Co.”, the host was my employer.

They could be extended and rolled on and on.

People just roll on from contract to contract.

I just kept going for 5 years [with the same host]; from one project to the next..

I guess to some extent its human nature, but yes, they become more like a pseudo employee over time, but we’re always pretty clear that they know their employment status is different to a permanent employee.

The host doesn’t want to directly employ those people [contractors]. They just don’t want to be involved in all of the pay-rolling, the superannuation, the payroll tax, all of the other things that are necessary for that person.

It was by the hour, and to do what I was told.

It would be easier if that grey area was allowed to be grey.

We don’t identify them necessarily as ours.


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I think the true employer of an indirect contractor is the agency.

Which is very grey. Which is very very grey.

If they did a solid audit they most likely will come up to us and say we have some contractors that should have been employees?

We don’t have a contractual arrangement whatsoever with the individuals that have to go through the agent.


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Table 66

Asymmetrical information


I didn’t withhold anything.

Yes, there is information missing but we are comfortable because of their history.

Our agency does not withhold information but the contractors are marvellous at hiding information: you have got no hope.

We don’t expose anything but we give them [host and agents] what they wanted to hear.

The agency can hold back information, they do yeah.

The contractors and the hosts can withhold information.

No, I didn't get the information that I needed.

I agree that some agents may not [pass on all the information to the contractors].

Yes, sometimes you could get a feeling or an indication that something is not being said. If that’s the case, then when we’re doing our reference checking we focus on those areas.

I didn’t withhold information but the host and the agent did.

It becomes our responsibility to get all the information we need directly from the individual.

I convey as much detail as I get unless there’s any commercial or sensitive information.

The agent may well [withhold information] where they had difficulty getting an experienced person to undertake the role. The host will under-talk the difficulties if there had been significant issues with health and safety at the site.

We just don’t employ them if there is a lack of information, but this depends on the market.

Sometimes the contractors withhold information is probably the answer.

Yes the host wouldn’t tell you everything and when you’d get there you’d bump into it.

We are more likely to rely on an interview and discussions with the contractor than to rely on information provided by the agency.

Yes, [there is information being withheld] but sometimes it has been a conscious withholding the information to make the opportunity more attractive.


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No, I never withhold information from the agent or the host to make sure I get the job.

We have never withheld information, but deep down I think that some agents deliberately withhold information from us.

Initially we probably don’t [get the information from the host] but it comes down to the ability of the consultant to be able to extract all the information that they require to be able to recruit a person. If we are dealing with a new client then we go through a very rigorous questioning technique to get all the answers we need.

I never withheld information, but the agents and the hosts don’t tell you everything at the beginning.

I would imagine that there should just be full disclosure.

He [the contractor] just blatantly lied [about his qualifications].

No I never withheld information, my future relied upon it, but some agents would.

You know it would happen. Of course, some contractors do not tell you all the information that they could.

I have no control over the information that was given to me.

I’ve never withheld information. 2: Neither have I.

Oh yes, the client can withhold information about the job.

You had to be pretty open, because your CV was your life, so you’d get found out too quickly, so I never withheld any information, no.

Deep down I think it is deliberate.

I’ve never had a situation, and we’re talking 20 years, where I thought that the client was not telling me everything.

The agency didn’t necessarily tell you everything, but I always gave everything.

Yes, contractors would hold back information… but it is a very small percentage. Its not a big issue.

They already knew me from previous contracts and there is a kind of ‘word-of-mouth’ system around the place.

It depends how desperate they are for a job.

They tell you one thing and you turn up on Monday and its totally different.


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Table 67

Outcome uncertainty


They kept me going by the hour until they didn't need me anymore. All these years I have always been on an hourly basis.

Normally the purpose of getting an independent contractor would be to do a set piece of work. I’m sure sometimes it falls into more general work. So they could be here for 24 months.

My contracts are all different. For instance, a design engineer might be specifically there to complete a design and even sign it off. But others might be for ongoing support or supervision or anything.

No, I have never taken on a job to produce a result for a fee at the risk of losing my job.

They end up being here for quite a period of time but we can demonstrate in those cases that they’ve been quite discrete elements of work. That’s what we aim to do, sometimes it’s difficult but that’s the agenda.

It’s all objective based.

I was just 'employed' and it just kept on going.

They come to perform and complete an objective, and they also can come here on an on-going contract basis to work and stay there for as long it takes.

Depends on what the actual project is. They [contractors] work on specific designs. Once they get to the end of that [project] other projects may come in.

I was at one host for 5 years and I just stepped from one project to the next.

We’ll hire them for a project, to fulfil that skill requirement for that period of time as a contractor, which could be three days a week or longer, it’s all variable depending on the age of the project and the time required to complete the project, however, we do have some people that we treat like employees, who are actually engaged, as contractors


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through a company that they own.

I was engaged by the hour, every hour, certainly.

Some independent contractors are engaged to complete a specific scope of work, others are integrated more into a project team.


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Table 68

Financial risk


I was never at financial risk, I could have become [at risk], if they had pushed the letter of the law, but it never happened.

The risk is all with the agency … there is still some obligation from my employer perspective.


As you are taking direction from your engineer then they are paying for the fix-up. I have no control over the information given to me.

So if they haven’t delivered a piece of work in a set timeframe we usually, extend their contract, so the benefit is to the contractor.

We think that the volume of Pty Ltd contractors is reducing as they are not happy with the risk of being deemed an employee associated with operating as independent contractors.


No the independent and dependent contractors do not have a risk here.


I was forced into opening a company to mitigate the risk to the host.

Do we take on that risk. We probably do. They usually extend their contract to get the piece of work done. So the benefit is to the contractor.

She was confident in her approach that the people supplied to the host via her agency were employees of the agency including the Pty Ltd entities and that they were not employees of the host. She also accepted that after a period of time (unspecified) that the contractors who were at the host site may become employees of the host as they looked like employees of the host.


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When I operate in a direct manner I am basically their employees so I would think that they are responsible for me.

If it is scrutinised in a lot more detail I think that the middle man [agent] will be shown not to be doing much but receiving a very significant sum of money, and not taking on any risk.



Are the contractors at risk when they work for you? Host; No.

The contractors do not take a risk. No, not much, bugger all.

sole traders are no good, they are too risky on the withholding tax Pty Ltd withholding tax and superannuation front.


Does the contractor carry a risk at work? Do you carry the risk for the contractor? Agent; It's grey, it’s difficult for a judge to decide who the employer is.

Even though I am here 5 days a week, being controlled by the host, my entity is not at any risk. I’m not confused about any of it.

Well they are certainly at risk for WorkCover because they’re not on our WorkCover.

We don’t accept any liability for is the action of the temporary worker when they under supervision and control of the host employer.

The most money I’ve actually lost while contracting was actually while contracting through an agent. They went under yeah!.

Yes they [the contractors] do have a financial risk.

I perceive that we’re involved in duplicity with some of these Pty Ltd or ABNs who choose to breach the 80/20 rules and things of that nature.

Yes, I have to rectify any work at my own time and at my own cost.

The Independent Contractor or Direct Contractor doesn’t have any risk here [with the host].



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It would have been dodgy if they wanted to catch me.

There is a risk and that’s why we persistently monitor it.

Only at the very end of the interview did he comment that all parties in the tripartite relationship had some level of risk as they were all a little unclear regarding their obligations in relation to engaging contractors.

I would be paid extra hours to fix up my own mistakes. So I didn’t have a financial risk.

The agency does not normally come and inspect our premises to satisfy our OHS requirements.

She commented that the volume of Pty Ltd contractors was reducing as they were not happy with the risk of being deemed an employee associated with operating as independent contractors.

They [the contractors] couldn’t care less about the risks!

It’s the host and the agent that worry the most. It is an issue.


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Table 69

Loyalty


I put my loyalty [to myself] first.

“Contractors are as loyal as the next 5$ per hour”

I have a joint loyalty.

I’m only loyal to myself.

We treat them like an employee, yes, we are loyal to the contractors.

Depends upon the person and how they are treated.

The host because I get to know them, I had no contact with the agent other than just sending in the timesheet.

Yes our organisation does treat the direct and independent contractors in the same way as we treat our own employees – For example, inviting them to social functions, involving them in bonus payments, OHS and on the job training.

We invite them to social functions and Christmas parties.

People come and go, so it doesn’t matter how loyal you are, you will still get terminated. I prefer to be a contractor.

I suppose essentially they are loyal to themselves.

It is a proper contract arrangement but people want to be treated the same as an employee anyway. And we treat them that way as well, we want them to be happy and still working through us.

I am always loyal to the host.

There’s no loyalty to the company from short-term people, but it depends on the job and the length of the job. One contractor, who has been here for 15 years I would say is completely loyal to us.

Loyalty is very much dictated by us.

So who are you loyal to, the agent or the host? Contractor: I would probably say both.


Loyalty comes down to personal relationships. So I think the loyalty is more likely to be with the host.


243

No I don’t feel like I am working for the agent at all.

I guess it’s difficult, The contractors are here to be loyal to us the client but I think they have an obligation to their agency.

We’ve got a lot of contractors that are loyal to us because we have been able to put them into different contracts with different host employers. Whereas with those that are in long-term relationships, their loyalty is with the client.

I mean there is obviously a certain amount of loyalty to the host who actually treats you well, and is fair and flexible.

Generally speaking, we get reasonable alignment with our contractors. They adopt the culture a little for a period of time. They play the game nicely. As to whether they feel loyal to us the host, I don’t know.

I would think the contractors would operate in their own interests first, then the host and then ours. It’s pretty rare for them to act in our interests because they do feel they’re an employee of the host I think more so than an employee of us.

I'd rather go direct because whenever I go with the agency, I don’t get to see the agency anymore and plus they get cut of my income. They (the host ) give me the job and I have to be loyal to them.

I have seen them become like the family in most companies.

I would say I have been very loyal to the host because I have been working daily with the host. I like to be loyal to the host.

As soon as somebody’s [the contractors'] interests become way more important than someone else’s then it’s the contractor who is going to go away.

My loyalty was with the agent.

If the contractors received a lucrative offer I’m sure they would jump ship.


244

Mainly to the host, once you are in their office.

I think initially they will work for their own interest. Because they want to make as much money as quick as they can. But I think once they have been in the organisation, then I don’t think their own interests will harm the organisation’s interests.


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Table 70

Expectations


Yes, we get a written set of expectations before we start.

It’s not always covered in writing because you’ve built up a relationship with an agent who has been sending personnel for fifteen years.

The client’s expectations are passed to the contractor.

Yes every time. Here are [to the agent to pass on] some expectations that we have for you, and here’s how we expect you to behave.

The expectations are laid out at the beginning of the contract.

On the first day, they sat me down and they said "this is what we expected of you". They gave me a broad scope of the job that was involved and expected me to get on with it.

Would we give our expectations to an agency, no, but our line managers would give them to the contractor.


I manage my output. If the contractors take a hard line and don’t go to company gatherings unless they are paid, then they are sort of a 'bit on the outer'.


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Table 71

Internal pressures


[The host says] You can only join this company if you become a contractor.


Our agency is definitely expected to sign hold-harmless clauses from the client.

I told the host to pay me more money now as there was plenty of work around. [Contractor exerting power].

So do the contractors ever get ostracised? Host; No.

If you want me to do the work for you and be responsible for my drawings then you have to pay me from $75 to $105 per hour and he just sat there and look at me and I told him to make a decision right now as there was plenty of work out there. He didn’t have a choice.

We do come across contractors being ostracised.

I’ve had them where they [contractors] have asked me to give them more money but not to charge the client any more money.

No I didn’t feel ostracises by the host’s staff because I was earning good money.

So do you find that your employees have a little bit of jealousy or do they ostracise the contractor sometimes? 2: I’ve seen that, I have worked in other companies where I’ve seen that go on.

They don’t bully us; just pressure us.


No we never get bullied by the host, but we constantly experience pressure to reduce our rates.

I don’t see being ostracised as a big issue.

The contractors (not the clients) are driving rate pressures.

No, I never felt ostracised.

We have never been bullied to make people contractors at the risk of losing the hosts business, but we do get bullied to sign hold harmless clauses. In turn we try to put the clauses on the contractors but it is very hard.


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Table 72

External pressures


The 80/20 tax rule forced us to incorporate.

Yes we might encourage that person to engage with us via an ABN or CAN and become a direct contractor”.

Yes there are pressures to bring down rates’.

Yes we do get pressured to reduce our rates.


Yes the clients are forcing us to take out insurances for people”, [host exerting power].

The agency power is diluted all the way through.

Some of the larger American companies or multinational companies always have these hold harmless clauses in their contracts. We do feel bullied by these.

Yes there are

pressures to bring

down rates.


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Table 73

Supervision and power


There was no supervision, no one checked me.

Supervision goes into that grey area whether someone is a contractor or an employee. It can have a huge impact… and we direct.

The host is responsible for the work and supervising the work.

The host always provides day-to-day supervision.

The chief engineer or drawing office manager would supervise them as they would for an employee”. “We wouldn’t involve the agency in the management.

We don’t accept responsibility for the actions of the contractor when they are under supervision and control of the host.

The lead always provides day-to-day supervision.

If we are engaging them directly on a contract and fully supervising their work and their outcomes, then they are just another form of an employee.

Generally it is the client who manages the independent contracts output.


We try our best to keep a distance from being seen to be an employer, but it doesn’t work. In reality, in a very short period of time, the contractors become part of the team

I’m sure even the host forgets that they’re our employee.

The client was the one who gave me day-to-day instructions.

The manager of that area, or the leader of that area will manage the contractors’ output, not the agency.

The host employer will be directing that person working through the independent contractor’s business.

I have a line manager who would realistically leave 90-80% to myself.

The host manages the work output. The agent does not have anything to do unless the contractor is not delivering.

it is the host employer’s responsibility to provide all the direction on the work that they need doing.


249

I manage my output, but the host provides day-to-day supervision.

The people who are not employed by us who come through the agency are managed by us. Discipline is different because we don’t have the direct employee relations, we can’t dismiss them.

The client has the responsibility obviously for day to day stuff.

The host managed my output, and day-to-day supervision.

Well it’s the agent who is responsible for the work output. Well in actual fact we manage it, but contractually, there’s a contract there and they [the contractors] have to have a level of performance and experience and be capable of doing the job.

No, we have not been forced to sign hold harmless clauses from the host.

I never thought of the agency having the power except that they pay you. As soon as you get a job they drop out of the picture.

The manager in the department performs the general management, day-to-day management. if there are no issues there is no real need for the agents to really get involved too much, they generally leave them you know.

We are not pressured by the host except to take out insurances for people we do not employ!

As an independent contractor I have often witnessed pressure, you know, the host demanded that I come on as a Pty Ltd Company and have my own insurances and workers comp etc.

Their chief, if an engineer, or if a drafter the chief drafter or drawing office manager would be expected to manage them as they would for any employee.

If you don’t sign the hold harmless clause they don’t use us! Yes we feel bullied.

I was never pressured by the agent to form a company.

No, that’s us who manages the output of the contractors.

Yes we are being asked to sign onerous clauses or hold harmless clauses.


Our line management is responsible for the day-to-day management of the contractors.

They don’t bully us; just pressure us.

No I haven’t been forced to become a contractor.

We can dispense [with the contractors'] their services with little or no notice, and we can scale the rates back a lot faster and a lot easier than you can with staff. And we do do it.

Experiencing pressure is not a regular thing. But we have.


250

Yes we do force some people to become contractors.

No, we never get bullied by the host, but we constantly experience pressure to reduce our rates.

If we are not happy with the (agent) terms then we just say "sorry we cannot work with you".

The contractors (not the clients) are driving rate pressures.

Yes we will encourage them, if the head count is full, to become contractors.

We have never been bullied to make people contractors at the risk of losing the hosts business, but we do get bullied to sign hold harmless clauses. In turn we try to put the clauses on the contractors but it is very hard.

We might encourage people to incorporate if the contract is short term.

The hosts put the same pressures on the direct contractors. They are sometimes desperate for a job and feel as thought they have to sign contracts hoping that things will be all right.

We never pressure agents to sign contracts with hold harmless clauses in them. Nor do we push people into being contractors.

Some of the larger American companies or multinational companies always have these hold harmless clauses in their contracts. We do feel bullied by these.


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Table 74

Additional confused comments from the contractors

Comments from contractors

I could have become a financial risk, if they had pushed the letter of the law.

I know it’s a grey area.

When I operate in a direct manner I am basically their employee.

It would have been dodgy if they wanted to catch me.

Ok, Ahmmm, the paperwork said that the agent employed me but really the host employed me.

The agency is my employer when I use my entity. But if I went direct using my entity the host would employ me.


Right now it is getting a bit confused. I would say it is the host who employs me even though I have an entity.

A lot of people are out there in all sorts of roles and work with limited comprehension.

We are always worried that the tax department was going to look too hard and you’d be dead in the water then- they may well say you should have been taxed and an employee of the host.

The other way we could get [around the tax] was to be dishonest. Have a ghost employee.

I was lucky over the last five years the tax department didn’t look at us.

My average contract length would be 3 years. I had a problem once and I had to change agent but stay with the same host.

I didn’t take any notice of the 80/20 rule.


It’s a definite grey area.

I had a business name and I used it but I did not employ myself, it was just a business name.

I’m not sure the present system is all that good. The system is working due to stupid government policy.


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Table 75

Additional confused comments from the hosts

Comments from hosts

The contractors would be treated like employees.

The risk of contractors being employees has a potential to be a big thing.

I suppose it’s easy enough to say well we’re ending your contract

Conflict is resolved in the traditional way, avoidance.

The risk is all with the agency


I perceive that we’re involved in duplicity with some of these Pty Ltd or ABNs who choose to breach the 80/20 rules and things of that nature.


We do have some people that we treat like employees, who are actually engaged as contractors through a company that they own.

The fact that he had a company name was irrelevant,

The system is confused; I think it does need clarity, yeah.

The relationship is between the contractor and the agency. It’s probably one of the areas that’s more grey than most in terms of the employment.

When the person comes through an agent I am not sure who provides the insurances.

It’s pretty vague.

It would have been easier if that grey area was allowed to be grey.

The agent is responsible for the work output. Well, we manage it!

Do we employ him? Yes and no. Can I say that? Grey. Very very grey area. I’d have to know more about what employment legally means.

Sometimes it gets difficult to distinguish, there's no real clear way of dealing with this. It is confusing. I think the line has become blurred.

One contractor has been here for 15 years.

We have contractors who have been here for 18 years, so tell me that the 80/20 doesn’t apply to them,

If they [tax office] did a solid audit they most likely will come up to us and say we have some contractors that should have been employees.

If the contractors are engaged for more than 12 months then the host is deemed to be the employer.

We [the host] are the employer. When they come through an agency, then we’re paying the agency, so the agency is the employer, not us, but I think it’s a case of bull baffles brains.

It is not very clear, there is a lot of grey I think.

Confidentially many of the relationships are close to the wire.

It’s definitely a grey area. There’s a lot of grey area in the system yeah.


253

Yes, I think joint employment would provide a better [solution].

We try our best to keep a distance from being seen to be an employer, but it doesn’t work in reality.


254

Table 76

Additional confused comments from the agents

Comments from agents


We feel seriously at risk. The host should be responsible for them.

The people supplied to the host via her agency were employees of the agency including the Pty Ltd entities.

The contractors may become employees of the host as they looked like employees of the host.

They really should be employees of the agent.


I perceive that we’re involved in duplicity with some of these Pty Ltd or ABN’s who choose to breach the 80/20 rule and things of that nature.


It’s the host and the agent that worry the most. It is an issue.


Yea we feel at risk. We feel seriously at risk.

She was confident that the people supplied to the host via her agency were employees of the agency including the Pty Ltd entities.

The contractors who were at the host site may become employees of the host as they looked like employees of the host.

They really should be employees.


The biggest areas of confusion are Superannuation, tax workplace health and safety. Liabilities, the whole thing.

Well their entity does employ them, but we consider them an employee.

No, no, the system is not well understood.

He was very confused about the tripartite relationship, which was really surprising as he has been in the business for 23 years

He was unable to answer some question, repeating that the subject was “grey’ and confusing.

It’s just a tax dodge from my perspective.

They do income splitting with the ‘misses'.

There is a lot of confusion about the 80/20 rule from a contractors perspectives.

Their entity does employ them, but we consider them our employees.

So we consider [ABN and Pty Ltd] our employees.

No, no the system is not well understood.

Errrrr, I can’t answer that. I don’t see us as being an employer because they are independent contractors. Yes. It’s a grey area.


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APPENDIX J

Cases that have awarded penalties

Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd and Ors [2015] HCA 45. Justice Lloyd-Jones in Fair Work Ombudsman v Jooine (Investment) Pty Ltd and Anor [(Jooine) 2013] FCCA 2144.

ACE Insurance Limited v Trifunovski [2013] FCAFC 3 (ACE) in which the court found that five insurance sales agents who had been engaged as contractors were, in truth, employees. The court ordered the ‘employer’ to pay over $500,000 in unpaid annual leave and long service leave entitlements. Herbert Smith Freehills (2016).

NSW Federal Magistrates Court, Fair Work Ombudsman v. Centennial Financial Services Pty Ltd (2010) 245 FLR 242, Fair Work Ombudsman (2011).

ASU v Options Consulting Group P/L and Anor. (1999) 47 AILR 4-217.

Slater v WorkCover/Allianz Aust. (Ciquita Brands Adelaide Pty Ltd.) CGU and Anor.[2002] SAWCT 27 (14 MARCH 2002).

Rebecca Thomson v Brunel Energy Pty Ltd. WAIRC 04102 (7 November 2001).

ALHMWU v Burswood Catering and Entertainment [2002] WAIRC 04778 (12 February 2002).

Melbourne v JC Techforce Pty Ltd. [1998] SAIRComm 62 (23 July 1998).

Morgan v Kittochside Nominees Pty Ltd. Australian Industrial Relations Commission, PR918793(13 June 2002).

Ankucic v Drake Personnel t/as Drake International. NSW Industrial Relations Commission No.6465 1996.


256

APPENDIX K

Nodes for Nvivo

1. 80/20 rule. (This is a tax rule) 2. Alternative. (Is there a better way to engage contractors?) 3. Asymmetrical information. 4. Behavioural basis. (Open ended contract) 5. Casual. (Employment relationship) 6. Conflict. 7. Confusion. 8. Dual Employment.

9. Employer of direct contractor? 10. Employer of indirect contractor? 11. Expectations. (Were they provided) 12. Goals. 13. Incentives. 14. Insurances. 15. Integration. 16. Legals. 17. Loyalty. 18. Management. 19. Network. 20. Objective based. (Opposite to behavioural based. Contract for a result or time

frame) 21. OHS. 22. Power. 23. Pressure. 24. Reason for contracting. 25. Risk.

26. Sham. 27. Statistics. 28. Tax. 29. Who do you think is responsible for the contractor?


257

APPENDIX L

Interview protocols

Contractor

Introductions:

Interviewer introduces himself and provides an overview of the purpose of the project and

seeks the appropriate consent from the interviewee.

Section 1: General introduction.

1. Do you own an ‘entity’? If so is it registered as

• Business name

• Partnership

• Pty Ltd Company

• Trust 2. Can you please describe your specialisation and the benefits of using an agent or operating in

a direct relationship? 3. What is the reason you chose to contract rather than be employed? 4. When you provide your services to a host how do you prefer to be engaged; directly or

indirectly, or do you prefer to be employed by the agent.

Section 2: Responsibility

1 Who do you think is the true employer of a direct independent contractor: the host or your entity?

2 Who do you think is the true employer of an indirect independent contractor; the host or the agent or maybe your entity? I.e. when the independent contractor uses an entity and an agent?

3 Would there be a difference if the independent contractor was ‘employed’ by the agent? 4 Have you ever been forced to create an entity by an agent or host so that you could be

offered work without being seen as an employee? 5 Who is responsible for your Professional Indemnity, Public Liability, WorkCover, Taxation?

Section 3: Occupational health and safety and management of the contractor.

1 Who do you understand to be responsible for your actions, including occupational health and safety, when you work in the host’s premises? Is there a difference when you are engaged on an indirect basis i.e. via an agent?

2 Would you prefer that your entity/agent and your host be jointly responsible for your occupational health and safety?

3 Would you prefer that your entity/agent and your host be jointly responsible for your day-to-day management?

4 Who performs the occupational health and safety inductions and training for you? Is it adequate?

5 Is a better way that occupational health and safety can be managed at the host sites?

Section 4: Theory

Agency.


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1 During the recruitment process do you perceive at times that there is information being withheld from you regarding the position? Similarly, do you always provide to the host and the agent enough information about your skills to enable a good decision to be made regarding your engagement?

2 Are you generally engaged to provide an outcome at your own risk or are you engaged to blend into the hosts core staff and take directions, without risk to you or your entity?

3 Are you generally offered incentives to comply with the hosts or agents requirements? 4 Is there generally a trial period when you take on a contract? How does the host and agent

establish that you have the skills for the position offered? 5 Do your goals align with the goals of the host client and the agency? 6 How is conflict managed?

Psychological

1 When you work in an indirect manner in the host premises are you aware of the expectations of the host and the agent? Are your expectations made aware to the host and the agent?

2 How are the host and agent expectations delivered to you? Are the expectations ever put in writing?

3 When you work in an indirect manner are you more loyal to the host or the agent. Is there an obligation to perform for the host, or the agent, or both or neither?

Section 5: Management:

1 Who manages your output? Who provides day-to-day supervision? 2 Do you ever experience pressure from a host or agent to accept lower than acceptable terms or

conditions? 3 Are you ever ostracised in the host’s premises? 4 Are you more committed to the host or the agent? 5 Does the relationship with either the host or the agent change with time? 6 When the market swings from being buoyant to quiet or vice versa, do the agents and hosts

change their attitude towards you?

Dual or Joint employment

1 Would joint employment provide better occupational health and safety; plus day-to-day management support for you?

2 If joint employment was enacted which forced you to be deemed a joint employee of the host and your entity/the agent, would you accept having pay PAYG tax, and have your liabilities and risks transferred to the employers?

3 Is there a better way to be engaged?

POWER? Does it change over time?

Interview close.

Interviewer thanks the contractor for supporting the research.

Host

Introductions:

Interviewer introduces himself and provides an overview of the purpose of the project and seeks the appropriate consent from the interviewee.



259

1. Can you please describe the specialisation that your organisation operates in and the benefits of engaging agents and ?

2. What would be the percentage of direct to indirect engagement of independent contractor’s?

Section 2: Responsibility

1. Who do you think is the true employer of a DIRECT independent contractor: the agency or your organisation; or maybe the independent contractor’s own entity?

2. Who do you think is the true employer of an INDIRECT independent contractor; the agent or your organisation; or maybe the independent contractor’s own entity?

3. Would there be a difference if the independent contractor was ‘EMPLOYED’ by the agent? 4. Does your organisation ever encourage natural persons to incorporate so that your

organisation can engage them as independent contractors rather than employees? 5. Who is responsible for the Professional Indemnity, Public Liability, WorkCover, Taxation of

the independent contractor?

Section 3: Occupational health and safety and management of the contractor.

1. Who do you understand to be responsible for the actions of the independent contractor, including occupational health and safety, when they work in your premises? Is there a difference when you engage an indirect contractor i.e. via an agent?

2. Would you prefer that your organisation and the entity/agent be jointly responsible for the occupational health and safety of the independent contractor?

3. Would you prefer that your organisation and the entity/agent be jointly responsible for the day-to-day management of the independent contractor?

4. Who performs the occupational health and safety inductions and training for the independent contractor? Is it adequate?

5. Do you think there could be a better way to manage the independent contractors’ occupational health and safety and general management? i.e. Dual employment?

Section 4: Theory

Agency.

1 During the recruitment process do you perceive at times that there is information being withheld from you regarding either the agent or the independent contractor? Similarly do you always provide to the independent contractor and the agent with enough information about your organisation and the position available.

2 Are independent contractors generally engaged by your organisation to provide an outcome at their own risk or does your organisation provide directions to the independent contractor, without risk to the independent contractor?

3 Does your organisation generally offer incentives to ensure that the independent contractors comply with your or the agent’s requirements?

4 Is there generally a trial period when you take on an independent contractor? How do you and agent establish that the independent contractor has the skills for the position offered?

5 Do your goals align with the goals of the independent contractor and the agency? 6 When the indirect independent contractor is working in your premises do you feel more loyal

to the independent contractor or to the agent? 7 Does your organisation treat the direct and independent contractors in the same way

as you treat your own employee’s - For example, inviting them to social functions- involving them in bonus payments, occupational health and safety and on the job training etc.?

How is conflict managed?


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Psychological.

1 When independent contractors work for your organisation are you aware of the expectations of the independent contractor and the agent? Are your expectations made aware to the independent contractors and the agent?

2 How are the independent contractors’ and agents’ expectations delivered to you? Are these expectations ever put in writing?

3 Is your organisation more loyal to the independent contractor or the agent? Does the independent contractor who works in your premises have an obligation to perform for your organisation, or for the agent, or both or neither?

Section 5: Management:

1 Who manages the output of the independent contractor? Who provides day-to-day supervision? 2 Do you ever pressure independent contractors or agents to accept lower than acceptable terms

or conditions? 3 Have you ever noticed that the independent contractor being ostracised in your premises? 4 Does the relationship with either the independent contractor or the agent change with time?

How? 5 When the market swings from being buoyant to quiet or vice versa, do the agents and

independent contractors change their attitude towards you? 6 Does your organisation generally request that agents take full responsibility for the actions of

the contractor by? Are ‘hold harmless’ clauses in the agreement between your organisation and the agent? How do you deal with this when you engage a direct independent contractor?

7 Would you say that your organisation pays more to the independent contractors than to your own employees? If so does this cause any difficulties?

8 Are the contractors, who you engage, more likely to act in the interests of the host or in the interests of the agent – or perhaps only in their own interests?

Dual or Joint employment

1 Would joint employment provide better occupational health and safety; plus day-to-day management support for the independent contractor?

2 If joint employment was enacted which forced you to be deemed a joint employer of the independent contractor with their entity/the agent, would you accept the liabilities and risks that come with that decision?

3 Is there a better way to engage an independent contractor?

Interview close.

Interviewer thanks the client for their contribution.

Describe what happens next.

Ask for a repeat if required or additional info is required.

Agent

Introductions:

Interviewer introduces himself and provides an overview of the purpose of the project and seeks the appropriate consent from the interviewee.


261


1. Can you please describe the areas of recruitment and specialisation in which your agency operates?

2. Does your employment agency employ, engage, (or both employ and engage) contractors to forward to a host organisation?

3. What percentage of workers would be engaged as independent contractors rather than employees of your agency? Section 2: Responsibility

1 Who do you think is the true employer of the independent contractors when you send them to work in the hosts’ premises; your agency or the host; or maybe the independent contractors own entity?

2 Who do you think is the true employer of the dependent contractor when you employ and send them to work in the hosts’ premises; your agency or the host; or maybe the independent contractors own entity?

3 Would there be a difference if the independent contractor was ‘employed’ by your agency? 4 Does your agency ever feel pressured by hosts to encourage PAYG type dependent contractors to

incorporate so that you can engage them as independent contractors rather than employees; knowing that if you do not do this you will not be allowed to sell those people to that particular host?

5 Who is responsible for the independent contractors Professional Indemnity, Public Liability, WorkCover, Taxation?

6 Section 3: Occupational health and safety and management of the contractor. 7 Who do you understand to be responsible for the actions of the independent contractor, including

occupational health and safety, when they work in the host’s premises? Is there a difference when they are engaged on an indirect basis i.e. via your agency?

8 Would you prefer that your agency and your host be jointly responsible for the occupational health and safety of the independent contractors?

9 Would you prefer that your agency and your host be jointly responsible for the day-to-day management of the independent contractor?

10 Who performs the occupational health and safety inductions and training for the independent contractor? Is it adequate?

11 Do you think there could be a better way to manage the independent contractors’ occupational health and safety and general management? i.e. Dual employment? Section 4: Theory Agency.

1 During the recruitment process do you perceive at times that there is information being withheld from you regarding the host or the independent contractor? Similarly do you always provide to the host and the independent contractor enough information about your agency?

2 Is your agency generally engaged by the host to provide an outcome at your agency’s risk? 3 Do you generally engage an independent contractor to provide an outcome for the host at the

independent contractors own risk or do you engage independent contractors to blend into the hosts establishment and take directions, without risk to the independent contractor?

4 Does your agency generally offer incentives to ensure that the independent contractors or hosts comply with your requirements?

5 Is there generally a trial period when you engage an independent contractor? How does your organisation establish that the independent contractor or hosts have the necessary skills or attributes?

6 How does the host and the independent contractor establish that your agency has the necessary skills to fill the position?

7 Are you generally offered incentives to comply with the hosts or independent contractors’ requirements?


262

8 Do your goals align with the goals of the host client and those of the independent contractor? 9 How is conflict managed?

Psychological.

1 Are you aware of the expectations of the host and those of the independent contractor? Are your expectations made aware to the host and the independent contractor?

2 How are the host and independent contractor expectations delivered to you? Are these expectations ever put in writing?

3 Is your agency more loyal to the host or the independent contractor? Is there an obligation to perform for the host, or the independent contractor, or both or neither?

4 Section 5: Management: 5 Who manages the independent contractors output? Who provides the independent

contractors’ day-to-day supervision? 6 Do you ever experience pressure from a host to reduce rates or conditions to the

independent contractor? How is this managed? 7 Are the independent contractors ever ostracised in the host’s premises? 8 Does the relationship with either the host or the independent contractor change with time?

How? 9 When the market swings from being buoyant to quiet or vice versa, do the independent

contractors and hosts change their attitude towards your agency? 10 Does your agency ever feel forced to accept ‘hold harmless’ clauses in the host contracts,

when you may not feel responsible for the actions of the independent contractors? 11 Would you say that the independent contractors receive more than the hosts employees

even when engaged for the same role? If so does this cause any difficulties? 12 Are the contractors, who you engage, more likely to act in the interests of the host or in

the interests of the agent – or perhaps only in their own interests? 13 Dual or Joint employment 14 Would joint employment provide better occupational health and safety; plus day-to-day

management support for the independent contractor? 15 If joint employment were enacted which forced you to be deemed a joint employer of the

independent contractor with their entity/the agent, would you accept the liabilities and risks that come with that decision?

16 Is there a better way to engage independent contractors? Interview close. Interviewer thanks the agent for their contribution.


263

APPENDIX M

Quantitative Surveys


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TABLE OF REFERENCES

ABS. (2010). Australian Labour Market Statistics (cat. no. 6105.0).

ABS. (2014). Forms of Employment Australia November 2013.

ACTU. (2011). Get the Facts. Retrieved from http://securejobs.org.au/

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