Think your offshore worker is a contractor? You could be in for an expensive surprise

Australian businesses rushing to offshore staff to cut costs are being warned they could be exposing themselves to significant legal and financial liabilities if they fail to structure those arrangements correctly.
 

According to outsourcing expert and Orbii founder Ivan Trajkovski, many business owners wrongly assume that hiring someone in the Philippines, India, Indonesia or elsewhere automatically places the employment relationship outside Australian workplace laws.
 

"That assumption could become one of the most expensive mistakes a business owner ever makes," Trajkovski said.
 

His warning follows a landmark Fair Work Commission case involving a Philippines-based worker who successfully challenged her dismissal by an Australian company after the Commission found she was, in substance, an employee rather than an independent contractor. The decision has heightened concerns that offshore workers may, in some circumstances, have access to Australian workplace protections and entitlements. 
 

The cheap employee that could become very expensive
 

Trajkovski said many businesses establish offshore teams after seeing advertisements promising dramatic labour cost savings.
 

"They're told they can hire someone for a fraction of the Australian wage and that's often where the planning stops," Trajkovski said.
 

"What many don't understand is that if the relationship isn't structured properly, they could potentially face claims relating to unfair dismissal, minimum wages, superannuation, annual leave and other employee entitlements."
 

"The legal risks extend well beyond the hourly rate.  Businesses think they're saving money, but one poorly structured arrangement could wipe out years of those savings."
 

Outsourcing isn't the problem
 

Trajkovski stressed the problem is not offshore outsourcing itself.
 

"We're huge advocates for offshore teams because, when done properly, they help Australian businesses become more competitive and create fantastic career opportunities overseas," he said.

"The problem is businesses trying to do it themselves without understanding the legal, tax, employment and compliance implications."
 

The DIY approach is becoming dangerous
 

Trajkovski said many Australian businesses are finding workers through social media, freelance websites or personal referrals before sending them contracts copied from the internet.
 

"They believe they've engaged an independent contractor because that's what the agreement says," Trajkovski said.
 

"Regulators and courts don't simply look at the heading on a contract, they look at the reality of the working relationship." 
 

Every country has different rules
 

Trajkovski said offshore employment involves much more than finding someone with the right skills.
 

"You need to understand local employment laws, Australian workplace obligations, tax issues, intellectual property protection, data security, payroll structures and how the engagement is managed day to day," Trajkovski said.
 

"There is no one-size-fits-all model and what works in one country may create significant risks in another."
 

Expert advice costs far less than litigation
 

Trajkovski is urging businesses to seek specialist advice before building offshore teams.
 

"Businesses spend months researching a new software package but will hire offshore staff after a couple of online meetings," he said.
 

"The cost of getting expert advice upfront is tiny compared with defending employment claims, paying back entitlements or restructuring an entire offshore workforce."
 

Offshoring is still one of the smartest growth strategies
 

Despite the warning, Trajkovski believes offshore staffing remains one of the biggest opportunities available to Australian businesses.
 

"Access to global talent can transform a business but outsourcing is no longer just about saving money, it is about building the right structure from day one," Trajkovski said.
 

"Do it properly and offshore teams can become one of your greatest competitive advantages. Do it badly and what looked like a bargain can quickly become one of the most expensive decisions your business ever makes."
 

About Orbii
 

Orbii is Australia's independent outsourcing comparison and matching platform, helping businesses confidently navigate offshore outsourcing. Founded by outsourcing expert Ivan Trajkovski, Orbii uses intelligent matching technology and more than 20 years of industry experience to connect businesses with the right outsourcing providers.
 

Often described as the outsourcing industry's equivalent of Compare the Market or iSelect, Orbii is bringing greater trust, transparency and accountability to the global outsourcing sector by helping businesses reduce risk, access world-class talent and make informed outsourcing decisions.

Based in Melbourne, Orbii's mission is to remove the guesswork from outsourcing and make it simple, trusted and accessible for every business.
 

For more information, visit www.orbii.co