Your Client’s Offshore Contractor May Legally Be Their Employee

OCTOBER 14, 2026

A contract page beside a magnifying glass revealing a person, illustrating that the substance of a working relationship matters more than its label

A 2024 change to the Fair Work Act and a Fair Work Commission ruling on a Philippines-based worker have changed the risk for Australian businesses running offshore teams on contractor agreements.

What changed

1. The Commission looked offshore

In Pascua v Doessel Group, a Philippines-based legal assistant on a contractor agreement, who had never set foot in Australia, was found to be an employee covered by unfair dismissal laws in Australia. The key issue was whether the written contract, which labelled Ms Pascua as an independent contractor, accurately reflected the true nature of the relationship. The Fair Work Commission determined that the relationship was, in substance, one of employment. The appeal failed and she was awarded compensation.

2. The law was rewritten

From 26 August 2024, the Fair Work Act defines employment by the real substance, practical reality and true nature of the working relationship. While a written contract that accurately reflects the relationship will be extremely helpful, it is no longer enough to just have a signed contractor agreement. What matters is the whole picture of how the working relationship actually operates in practice.

A business in our community is facing this right now

Does this apply to you or a client?

To work out whether someone is your employee or a genuine independent contractor, you need to look at the whole picture: not just what the agreement says, but how the arrangement actually works day to day. The law sets out a number of factors (called “indicia”) to consider.

Ask yourself these questions about each of your offshore workers (this list is not exhaustive):

Does your contract reflect a genuine independent contracting arrangement?
Did both you and the worker intend to enter into a contractor relationship, not an employment relationship?
How much control do you have, or could you exercise, over how the worker does their job?
Does the worker only work for you, or do they also provide services to other businesses?
Can the worker send someone else to do the work, or must they do it personally?
Who bears the financial risk if something goes wrong? Does the worker hold their own insurance?
Do you supply the worker with tools, equipment or a workspace?
Is there an expectation that the work will continue on an ongoing basis?
How is the worker paid: by the hour or day, or for a specific deliverable? Who manages their tax obligations?
Does the worker wear your uniform or display your branding?
Can the worker set their own hours, or do you dictate when they work?

No single factor is decisive; it is the overall picture that matters. That said, these factors carry considerable weight, and the degree of control you exercise (or have the right to exercise) over how work is performed will be particularly important to consider.

Four checks for any offshore provider

Businesses that have worked through this risk have generally landed on the same solution, one that materially reduces and restructures that risk, by partnering with a genuine, outsourced provider.

Check	Why it matters
Genuine local entity	Registered in the Philippines, with its own operations on the ground.
Legal employer, on paper and in practice	Contracts, payroll and day-to-day HR sit with the provider.
Local compliance & benefits	Statutory contributions, leave and labour law handled under Philippine law.
Liability and indemnity, clearly stated	The provider’s liability and indemnity terms in writing, including the limits and exclusions that apply, and specifically how the agreement responds to a claim that the Australian business was the real employer.

Where People Work Smart fits

People Work Smart is a preferred offshoring partner of UBT for Philippines-based workers. It has its own Philippine entity and is the legal employer of its team members. People Work Smart manages payroll, statutory benefits and compliance locally, and contracts with community businesses on a B2B service basis.

Want to talk through your current offshore arrangements?

If you are reviewing how your offshore team is engaged, or advising a client who is, get in touch and we will walk you through how a genuine, outsourced provider structure works.

General information only, not legal advice. Sources: Fair Work Act 2009 (Cth), employment definition amendments from 26 August 2024; Pascua v Doessel Group Pty Ltd [2024] FWC 2669; Doessel Group Pty Ltd v Pascua [2025] FWCFB 43; Pascua v Doessel Group Pty Ltd [2025] FWC 1833. Case example shared with permission; business anonymised.

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