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​What does the Fixed Term Contract legislation mean for the future of SAP contracting in Australia and can you still hire contractors?

Over the last year, we have been following this legislation closely however after speaking with many IT leaders in the industry, there seems to be some confusion as to what it really means for daily rate contracts within our industry, with some business’ being informed internally by HR that they can no longer hire contractors on longer projects! 

You can read our blog which outlines the legislation changes and what it means for businesses here.

So, is this true?

Good news, you CAN hire daily rate contractors and keep them as a contractor for over 2 years (and extend) providing they fall under the below exclusions;

1. They are a specialist skillset

2. Meet the high-income threshold (or per annum equivalent)  - The high income threshold changes each year. From 1 July 2023, it is $167,500.

3. Training Arrangements

4. Essential work

5. Emergency or temporary circumstances

6. Positions subject to Government Funding

7. Governance positions

8. Award provisions  

I think when working with this legislation and its exclusions it's important to keep in mind the reasons behind the introduction of this legislation and who it was created for. And whilst I don't agree with uninformed "sweeping" legislations across mixed sectors, industries, work types, skilled and unskilled labour - this government does!

So when interpretating it, I find it useful to apply logic and fairness.

Highlighted above are the 2 main exclusions that would be more relevant to the SAP/IT industry, although a couple of others may also apply to your business/circumstance.

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Is SAP a specialist skillset?

Yes, in most cases. IT is used in an example on the Fair work website. Where the person is engaged to do the same “Specialist Skill” until the work is complete.

This is good news for contractors and customers alike, as SAP Programs/Business transformations tend to take 3-5 years. Contractors hired onto these type of Programs will be covered under the above “specialist skillset” exclusion as will anyone backfilling permanent resources moving on to the engagements.

Where this exclusion will not apply is if you are just hoping to hire someone into a BAU role where the skill they use may vary depending on the work and it is clear that the role is a permanent role within the organisation. However, if that is the case then hiring for a Permanent resource would be more beneficial for all parties.

Nevertheless, there are occasions you may still require a Contractor. For example, if you are unsure of the permanent skillset you require or if there is a skills shortage in that specific skillset; in this scenario the next highlighted exclusion would most like apply.

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Do they meet the High-income threshold?

The current threshold as of July 2023 is the full time per annum equivalent of $167500. This will change or at least be reviewed annual.

Which is roughly $650 per day to the Contractor  - this is important, the contractor needs to paid $650 per day directly to themselves (not the cost to the company)

Again, in the SAP market it is highly likely that the Contractor would be paid significantly higher than $650 per day. Here at Speller, for the last 2 years our average pay rate to our Contract Consultants (average across ALL roles and skillset, Program Managers to Super Users  - includes roughly 450 Contractors) is $935 per day.

Whilst technically the Agency or Services Partner are the employers of these resources and are the ones responsible for ensuring we meet legislative requirements. I would still advise that the end company also has some visibility and responsibility when it comes to Contractors working on their site,  or at least work with a trusted partner whom you know keeps up to date and follows current legislation and guidelines.

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Just because you are paying more than the high-income threshold does not mean the consultant is being paid it. Likewise, it is likely (certainly when dealing with Speller) that we will be wanting more input into what our resources are working on when it comes to an extension (especially if they do not meet the high-income threshold).

You can read more about the legislation and it's exemptions here

If you would like more information on this then I would encourage you to read the links included. However, if you prefer to get your information verbally then I am easily reachable on my mobile or email judyc@spellerinternational.com.au  and would be happy to book in a coffee to discuss with you and/or your HR partners.