Free tool
Offshore Contractor or Employee? Free Misclassification Risk Check for Australian Businesses
Most Australian businesses engaging Filipino virtual assistants, bookkeepers, or customer support staff call them contractors. Some of those arrangements are structured correctly. Many are not — and since August 2024, Australian employment law applies a stricter test to determine which is which. This free tool assesses your arrangement against the Fair Work Act's whole-of-relationship test and the jurisdictional principle from Pascua v Doessel Group. The risk score is free and immediate. No email required. The full breakdown — which factors are driving the score, an indicative financial exposure, and what genuinely doesn't apply — is behind an email address.
How is their work directed day to day?
This tool provides an indicative assessment based on general principles of Australian employment law, including the whole-of-relationship test in section 15AA of the Fair Work Act 2009 (Cth). It is not legal advice and does not create a lawyer–client relationship. Whether a particular worker is an employee depends on the full facts of the engagement, and different tests apply for Fair Work, taxation, payroll tax and workers compensation purposes. Obtain advice from a qualified Australian employment lawyer before acting. Last reviewed: 1 July 2025.
How Australian law decides if your contractor is really an employee
Before August 2024, Australian courts placed significant weight on what the contract said. If it called someone a contractor and they agreed to that label, courts generally respected it — even if the day-to-day reality looked more like employment. The High Court decisions in Personnel Contracting and Jamsek (both 2022) reinforced this contract-centric approach.
Section 15AA of the Fair Work Act, which came into force on 26 August 2024, changed that. It requires courts and the Fair Work Commission to determine employee status by looking at the real substance, practical reality and true nature of the whole relationship — not just what the contract says.
The factors courts consider include:
- Who controls how the work is performed, not just what work is done
- Who supplies the tools and equipment
- Whether the worker can delegate the work to someone else
- Whether the worker bears genuine financial risk and operates their own business
- Whether the worker is integrated into the engaging business's operations
A contract that calls someone a contractor is still relevant — it is one piece of the picture. But it is no longer the picture.
Can Australian employment law apply to a worker in the Philippines?
This is the question most Australian business owners assume the answer to is no. Pascua v Doessel Group (2023) established that the answer is more complicated.
The worker in Pascua was based in the Philippines, held no Australian visa, and had no physical presence in Australia. But she had a direct contractual relationship with an Australian employer that purported to dictate and control the manner in which she performed her work. The Fair Work Commission found that was enough to establish jurisdiction. She was entitled to bring an unfair dismissal claim.
The key connecting factor is the direct contractual relationship with an Australian national system employer, combined with Australian management of how the work is performed. Where both elements exist, the worker's physical location outside Australia does not automatically defeat a claim.
Not every offshore arrangement has both elements. An EOR arrangement removes the direct contractual link — the employment contract is between the worker and the EOR's Philippine entity, not the Australian business. That structural difference is what this tool measures under Axis B.
What misclassification actually costs
If a worker is reclassified as an employee, the consequences work backwards from the start of the arrangement.
The dominant exposure is the wage differential — the gap between what was actually paid and the applicable Australian minimum wage or award rate, multiplied by hours worked and the full length of the engagement. For a single worker engaged for three years at AUD $15/hour against the current national minimum wage of $24.10, that is roughly $46,000 in wage underpayment alone.
On top of that:
- Annual leave — 4 weeks per year of service, valued at the Australian reference rate
- Personal/carer's leave — 10 days per year
- Notice entitlements under the NES, scaled by tenure (1 week under 1 year, up to 4 weeks over 5 years)
- Unfair dismissal— compensation capped at 6 months' pay, assessed at the Australian reference rate
- Sham contracting (s357) — a civil penalty provision; penalties are assessed by the court and are separate to any back-pay liability
The gated breakdown calculates a specific range for your arrangement once you provide an email address.
What doesn't apply
Being clear about what you don't owe is as important as understanding what you might.
Superannuation:The Superannuation Guarantee is generally not payable for a foreign resident performing work outside Australia. Section 27(1)(b) of the Superannuation Guarantee (Administration) Act 1992 provides an exemption for contributions in respect of work performed wholly outside Australia by a non-Australian resident. If your worker is based in the Philippines and working from there, SGC is typically not owed. This tool includes this as a genuine “does not apply” item — not a caveat.
PAYG withholding: Standard Australian PAYG withholding obligations apply differently for payments to foreign residents for work performed outside Australia. This is a separate analysis from the employment status question and beyond the scope of this tool.
A note on two parallel tests:The s15AA whole-of-relationship test governs employee status for Fair Work Act purposes only — unfair dismissal, general protections, NES entitlements, and sham contracting. For superannuation, payroll tax, and workers compensation, the ordinary common law test applies, where the contract carries more weight. A “safe” result under one test does not automatically mean you are safe on the other.
How to reduce the risk
The most direct structural fix is an Employer of Record (EOR) arrangement. An EOR employs your worker under a Philippine employment contract through a Philippine entity. Your business contracts with the EOR — not with the worker directly.
That removes the direct contractual relationship that was the central jurisdictional hook in Pascua. It also means your worker receives proper Philippine statutory entitlements — SSS, PhilHealth, Pag-IBIG, and 13th month pay — which removes the Philippine-law misclassification risk separately.
The accurate claim: an EOR arrangement materially reduces exposure under Axis B (jurisdictional connection to the Australian national system) by removing what has been the strongest connecting factor in the case law. It does not guarantee that no claim can arise under any circumstances — the whole-of-relationship test still matters — but it removes the hook.
Use the EOR cost calculator to model what that transition would cost for your team.
Frequently asked questions
Is my Filipino virtual assistant legally my employee?↓
It depends on the real substance of the relationship, not what your agreement says. Since August 2024, Australian courts apply the whole-of-relationship test in s15AA of the Fair Work Act — looking at who controls how work is performed, who supplies tools, whether the worker can delegate, and whether they genuinely operate their own business. If your VA works set hours directed by you, uses your systems, cannot send someone else to do the work, and effectively works only for you, the arrangement may be characterised as employment even if both parties signed a contractor agreement.
Can a worker in the Philippines make an unfair dismissal claim in Australia?↓
Yes, in some circumstances. The Fair Work Commission in Pascua v Doessel Group (2023) found that a Philippines-based worker had jurisdiction to bring an unfair dismissal claim against her Australian employer. The key factor was a direct contractual relationship with an Australian entity that controlled how she performed her work. Physical location outside Australia did not defeat the claim. The worker's visa status was also found to be irrelevant.
Do I have to pay superannuation for offshore staff?↓
Generally no. Section 27(1)(b) of the Superannuation Guarantee (Administration) Act 1992 exempts contributions for work performed wholly outside Australia by a person who is not an Australian resident. If your staff member is based in the Philippines and works from there, the superannuation guarantee typically does not apply. This is one of the genuine 'does not apply' items this tool flags in the gated breakdown.
What is sham contracting?↓
Sham contracting is where an employer misrepresents an employment relationship as a contracting arrangement — either by dismissing an employee and re-engaging them as a contractor, or by knowingly making a false statement to persuade someone to work as a contractor. It is prohibited under s357 of the Fair Work Act and carries civil penalties. Whether it applies depends on whether the worker would otherwise be an employee, which is assessed using the whole-of-relationship test.
What changed in Australian law in August 2024?↓
Section 15AA of the Fair Work Act came into force on 26 August 2024. It requires courts and the Fair Work Commission to determine employee status by looking at the real substance, practical reality and true nature of the whole relationship — not just what the contract says. Before s15AA, the High Court decisions in Personnel Contracting and Jamsek (both 2022) had placed significant weight on the written contract. Section 15AA effectively reverses that approach for Fair Work purposes.
How much can misclassification cost?↓
Costs depend on how long the arrangement has run, the wage gap, and the number of people involved. The dominant exposure is wage underpayment — the difference between what was paid and the applicable Australian minimum or award rate, going back to the start of the engagement. On top of that: annual leave (4 weeks per year), personal/carer's leave (10 days per year), and notice entitlements under the NES. For a single worker engaged for three years at AUD $15/hour, the indicative total exposure — excluding sham contracting penalties — is roughly $60,000–$90,000. This tool calculates a range for your specific situation once you submit your email.
Does using an EOR fix the problem?↓
An EOR arrangement materially reduces your exposure by removing the direct contractual relationship between your Australian business and the worker. That relationship was the central jurisdictional hook in Pascua v Doessel Group. Engaging through an EOR means the employment contract is between the worker and the EOR's Philippine entity — not your Australian company. This is what this tool measures under Axis B (jurisdictional connection). An EOR does not guarantee that no claim can ever arise, but it removes what has been the strongest connecting factor in the case law.