Hi
I am an Employee (white collar) at the moment and my company wants me to turn into a Contractor.
My salary is $800 before tax. Employer has offered to pay 15% extra on top of what i am getting at the moment including all the leaves. Also he will 'look after' my Super every week. Have been working for 5 years and trust the employee.
What should I do? Should I go ahead? Any advice? Thanks
This is good advice.
Let me be even clearer - you cannot generally simply choose whether you are an employee or a contractor, that decision depends on the nature of the employment.
If you are exercising independent control of your work, you might be a contractor - regardless of what you think.
If you are entirely under the control of the employer in the manner, time, location and method of work - you are probably an employee - regardless of what you call yourself.
CA here and this is the correct answer.
It looks to me like the employer is looking for an easy way to get rid of the employee.
I would be very careful about going down this route.
Will implies uncertainty. Contractors by definition NEVER get overtime. Contractors also never get paid leave, that should also be obvious. You only get paid for the time you put in. If your sick, holidays or whatever then you dont get paid.
True you get paid the hours you work but if you get paid hourly you don't need to be paid overtime as the contractor rate makes up for any overtime rates. Plus you don't have to work overtime although I'm sure they would make your life harder if you didn't.
Personally i dont see how an extra 15% rate as a contractor can possibly be considered a gain for the employee. 10 sick days and lets pretend 2 weeks holidays amount to 10% paid time while not working.
Taking the 15% contractor rate which means no ho.idays and no sick days means you are just 5% ahead and i havent even attempted to figure out other employee losses.
@ninetyNineCents: totally agree 15% is not enough for the risks taken. I would be looking at 20-25% at least if I was in OPs shoes.
Im sure there are other factors we have forgotten that would require at the least 20 or 25% to break even.
Personally i wouldnt go on a contracting rate unless payment was at least 50% above full time.
@ninetyNineCents: I'm on more than 50% but I'm in a different situation to OP. So I guess each person has there own minimum requirements depending on experience, risk taken, the role etc. Like you said there are many factors involved.
You cannot be contractor (freelander) if you work for same company.
I think people forgetting one thing about contractors, they are disposable.
So if you switch, the company can terminate your contract just like that.
Ask for minimum term, like as long as possible, 2 years maybe.
And as above 15% is nothing. What's that $800? A day? A week? 15% after tax is nothing.
The company won't offer you something good,regardless how long u have been with them. They will look into the loophole, and screw you up.
Before you agree to anything have a solicitor check the contract, ask yourself how does it benefit you to become a contractor and how does it benefit them. Does the benefits outweigh the negatives. Usually speaking regarding what you lose and gain, you would propably need to increase your pay by at least 20-30% for it to be worthwhile.
if your pay is staying the same, stay an employee, you got more stability, if your pay increases substantially under a contract, go that route.
Generally Permanent is more 'stable' but not always the case — I worked as a contractor for a large multinational firm during the GFC, several hundred staff were laid off about every 3-4 months over the year I was there. The contractors were the last to get the boot, and that was when business started to stabilize. Some of those staff I knew personally had been there 15 or 20+ years when they were made redundant, while 457 workers replaced a few of them. I can only imagine why the accounting department would have done it that way.
Typically a contractor should expect 50%-100% more than their FTE. Source: I've done both, currently contracting. Needed to cover any type of leave and potentially not working all year if you only get a 6 or 9 month contract.
I use this website to calculate the rate
http://www.users.on.net/~wallala/Calculators/salary_rate.htm
As a contractor, you won't get paid:
Your hourly rate should increase at least 20% just to cover those losses.
+1. This. Also, if the company gets rid of you, they don't have to pay you anything. As am employee, you are entitled to long service leave, at least in Qld anyway. I was with a company for 6 years and there were talks of redundancy at one point. I calculated my leave payout, it was something like 6 months pay if I got made redundant.
The other thing is that if you got injured performing work duties, your injuries are taken care of by Work Cover. As a contractor, you may need to sort out your own cover.
If I am in your shoes and got offered the same pay as a contractor, I would pick to stay an employee.
That only applies if you are working off-site, I believe — the employer needs to provide a safe workplace for staff/contractors under workcover, and has public liability insurance to cover visitors/clients/public/etc.
If you were a trades person switched from employee to contractor you would need your own cover as you are likely to be working off-site; or if you were a taxi driver that switched stinky falcon for a shiny Uber rocket, you would need your own insurance.
In Victoria, WorkCover insurance (or self insurance if the company has negotiated self insurance with WorkCover) will cover a person injured at work.
At my work, we are self insured, and all contracts should they be injured will be covered by their own employers WorkCover insurance or self insurance. I believe it is about $900 per year for a 2-man Pty Ltd company to get Workcover insurance.
You will also need Public Liability insurance most likely, unsure on the cost of that.
Depending on his true class workers comp if anything happens!
The contractor also gets no paternity/maternity leave, which is of particular relevance to you as an employee — you should check your current employee agreement conditions to see what else you might be losing.
20% base i would hold out for 40% over what your get now as other coast of been contractor.
As a contractor, you will also need professional indemnity insurance in many fields.
For example, an engineering contractor without any form of liability insurance is just asking to be sued and bankrupted.
You know what your benefits are as an employee. You will lose some of them as a contractor, but also gain a few. Your tax liabilities will change once you start claiming expenses. You can deduct assets worth less $20k immediately.
Your tax liabilities will change once you start claiming expenses. You can deduct assets worth less $20k immediately.
Not necessarily. If the OP is performing the same function under contractor/employee structure then their income will be caught by PSI rules and the taxing will be identical to being an employee.
The expenses you can claim as tax deductions are the single advantage as a contractor for most people, assuming you continue to work the same, 38hr or so/week.
Only your accountant will be able to give you the full rundown on your deductions, which vary according to your profession, earnings, specific tasks, and extent of your accountant's knowledge — be sure to discuss with them prior to making a decision, as this could mean a significant saving, or none, from the contract change.
To make that 20k deduction, you have to:
- make a job-required, job-relevant, purchase under $20,000
(ideally that you were planning to purchase assets anyway and/or have a real need for), your accountant may let you claim your new TV/mobile/even a car up to $20k, but it has to relate to your business;
- wait until the end of the financial year to claim the deduction;
- if you have receipts to show you made the purchase prior to 30/6/2015, you get 30 cents back in tax, purchase between 1/7/2015 - 30/6/2017, you will get 28.5 cents back (divided by the days left in the financial year since the purchase);
- theoretically you may be able to claim existing assets that were purchased already, but prior to 30/6/2015
I am going to call this a BS move on the part of the employer. Don't do it, unless you will be completely compensated for all the loss of benefits.
Been there done that…..not worth it if you're getting paid the same amount of money!! I had an ABN and you need to fork out money for this. The tax is 30 cents from the 1st dollar I earned unlike the slab structure for PAYG employee. My tax was more in the end but I wrote off many legitimate expenses to keep the tax down. Worst of all, I lost all the perks as an employee. Missed out on Annual leave, sick leave, personal leave, company bonus and all other employee benefits. I came off second best with this arrangement and lost benefits including training and have to do self training to be able to be on par with the market. I had to pay my own super, tax work became complicated as I have to file returns every 3 months even though my accountant did all that, I have to sit there and oversee to make sure that he didn't miss anything unlike employee who has to go thru this only once in a year….
I also dreaded easter break, xmas holidays and any public holidays as I don't get paid for those days….heck I couldn't even afford to fall sick and did a worse thing of rocking up to work visibly sick and was told to leave. Being contractor takes careful planning, you need to plan early in the year and save money in a separate account to be used around the easter and xmas time as your pay will take a hit during the months of April and December. I would tread even more carefully if you're a single income earner with a mortgage and family. I couldn't even go on holidays without planning well in advance and having to save up atleast 2 months of pay to pay for the trip and to pay for everything else like mortgage here
I also had to take out income protection insurance to cover my income when I am injured or too sick to go to work with a 15 day payout and paid in excess of 200$ for the premiums alone each month due to shorter wait times. I couldn't take this anymore, gave it all up after 2.5 years of being an independent contractor and went back as an employee with another company. I did take a pay cut but now I am much more relaxed and know that my pay is the same each month and also take annual leave when I want and know that my pay will come through without fail to cover the myriad's of payments!!
Look, in short this setup works for high income earners. My mate is an IT Security consultant and earn north of 1K per day before tax and will not change anything about it as he is very well disciplined and saves every bit he can for the rainy day and holidays!! Apologies for the big post but I had to tell my dreaded experience. Good luck with your decision.
Thanks for sharing
In my case i will still get super, all the leaves etc
I can also get the company to do my taxation every quarter at their exp.
Paid leaves? I have never heard of such an arrangement in Australia. You're casual (contractor is casual employee) and yet you're entitled for everything? Question to ask is what's in it for the employer to make you convert to contracting? Sorry mate, something doesn't add up here. It reminds me of the saying that if its too good to be true then it probably is…..All the best anyways and hoping it works in your favor. Cheers.
They probably want the option of letting him go at short notice and not wanting to pay him a package.
@onetwothree: that was my first thought too. Why else would they want to pay someone more to do the same job??
The tax is 30 cents from the 1st dollar I earned unlike the slab structure for PAYG employee.
30% flat tax is only if you are set up as a company. For sole traders with ABN it's still progressive tax. It's a lot more complicated if going the route of a company.
I had an ABN and you need to fork out money for this.
this must have been a long time ago. applying for an abn is free.
https://abr.gov.au/for-business,-super-funds---charities/app…
Yep, I am talking around 2008 when I got an ABN and paid around 1200$. Good to know now its free
Abn has Always been free!
You only pay extra to register a company. Sole traders is fine as well as trading under the same name. Unless you wona trade under a different name it's free.
ABN always free, do you mean ACN which relates to a Company you setup?
ABN has always been free. Always. He must have used a 3rd party website to apply for his ABN.
No different to people that use etax.com.au, pay for it and think it's an ATO product.
There is websites that do the same for ABN's
My salary is $800 before tax. Employer has offered to pay 15% extra on top of what i am getting at the moment including all the leaves. Also he will 'look after' my Super every week.
you get an extra $120p/w and you get to keep all leave pay? is there a chance that a takeover around the corner or is the company closing up shop?
I am the sole employee for last 5 years and company can't afford to get rid of me until company exists. Accountant has ordered major changes in the structure and wants no employee on the books. So i am in the position to negotiate.
Sounds very strange. THey msut be looking for an easy way to sack you without paying out some major entitlements.
Any accountant here who can advise on the tax implications now on? Thanks
I'm a Contractor through a recruiting agency in white collar. Been doing that for a few years now and I love it. Yeah I don't get paid when I take leave but I would recommend to always have plenty in savings (not just for holidays but if you are long term sick). I also make sure my contract with the recruitment agency has a notice period of at least 1 week but I prefer 2 weeks. I don't know if it is possible in your situation but I would look into a payroll agency (basically a recruitment company who payroll people for a small cost). I agree with an above comment that 15% is not much more when you are taking all the risks.
However in saying all that it does sound rather dodgy that your current employee wants you to convert to a contractor. It usually costs the company more so they generally do that if it is a project type role which is what I do.
Hi guys
As I mentioned before i am not starting a new job
Company is going through major transformation and there is no possibility of making me redundant as i am the only employee. Company is not in position to hire someone else and train him all over again.
Fair enough. With the redundancy put aside what reason did they give you for putting you on as a contractor? I can't think of any benefits for the company.
No longer required to withhold / remit PAYG. No need for super guarantee. Possible FBT benefit if applicable. Reduction in workers comp expense. Ability to force payout of 'holidays' as opposed to suggesting a payout (particularly attractive with only one employee). There are a few 'perceived' benefits and a few actual benefits. I still firmly believe the OP's suggested setup would be held a sham if picked up. I have been the indispensable only employee before and am now finance manager for a SME and I would still turn down the deal. Reading between the lines, their reporting and planning obligations go down and OP's obligations go up. If business is picking up, take over or merger could be coming up. Alternatively, if things are going south, contractor has less recourse to recover funds as they are unsecured creditors like most suppliers.
EDIT: Just realised we're talking about $800 per week. Not worth the hassle OP.
Id be very wary of saying your job is secure. You might trust your current immediate boss but if others are getting involved, there is a lot of management who are absolute schmucks that get saved by good staff.
People can do anything to save money (especially when they are new and dont understand the business).
A lot of small businesses just evolve, they might get rid of key people theyll struggle for a while but somehow make it through.
But im always very wary of change, they probably wouldnt be offering you extra money if they werent getting even greater benefit out of the change themselves. But if you genuinely feel safe then its a win-win situation.
Also if you work in an industry where you feel you could comfortably get another job, then it may not be so much of a concern.
So your paid $800 a week and your the only employee which by the sounds of it runs the business. If I were you I would be looking for a new much higher paying job.
Company's benefit is now onwards it wont have any employees.
I would be also paying less tax as sole trader.
My invoices would be for 'consultancy' and i will be invoicing even when i take annual leave (that covers my leaves).
Plus company will be paying super every week directly into my super fund
Company's benefit is now onwards it won't have any employees.
What is the compelling advantage of this ?
I would be also paying less tax as sole trader.
Why do you think that ?
Are you working for a 7-11 store ?
The pay would likely be 350pw of it was 711,from my casual guessing.
What is the compelling advantage of this?
No need to set up payroll. No need to pay superannuation, workers comp, payroll tax, etc (although with only 1 employee not likely to need to pay payroll tax either). No need to deal with withholding tax in BAS/IAS. No need to have other liabilities such as annual leave, long service leave, etc. Anyway, employee cost to a company far exceeds that employee's annual salary.
However as @PBG has stated, I think it's likely to be caught by the PSI rule.
I think a contractor is usually expected to supply their own equipment.
I would be also paying less tax as sole trader.
This is 100% totally incorrect. Refer my comment above about PSI income and read the link I provided. Unless you are being dodgy and claiming deductions that you are not entitled to, in which case it's no different to claiming dodgy deductions as a salary employee.
If you're going to be a sole trader (i.e. have an ABN), keep in mind that you'll have to register for GST once you hit $75,000 annually at which point you're going to need to charge your "employer" 10% GST. Also, as someone said above - just because you or your employer say you are contractor does not mean you are actually a contractor:
https://www.ato.gov.au/Business/Employee-or-contractor/How-t…
Also, you'd want to double check about your super - taken off ATO website: "As a sole trader you're responsible for your own super arrangements"
You might want to seek advice from your own accountant (you'll probably need to pay one anyway to file your returns and statements properly if you go ahead with this), or call the ATO to clarify if this arrangement is even possible for you.
IMO, 15% extra is hardly worth the extra hassle at $800/week (unless you meant $800/day which then means you'd only really be getting an extra 5% unless your employer is already expecting you to charge an extra 10% to cover GST).
If they are gonna pay your super, as its not required by law, why dont you just get them to pay that super money directly to you (add it into your charge) and then you can decide how much of that money you want to put into super.
certainly!
If i want to keep the money instead of putting it into super i can keep that, but accountants have verified the company can contribute directly into my super fund.
Actually if he is being contracted as an individual (or PSHP) supplying primarily labour (services rather than result) then Super is still payable.
Do not forget the value of training that you would lose out
From my chat to the contractors in my company. They advise to always ask for 40 percent more then your full time salary. Also work out your salary from a 40 week year, because you might lose your job or can't find a roll on contract in time. Always have 3 months worth of pay in the bank as well.
They should be paying 2-3 times your salary to make it worth while. Since I have became a contractor I work harder than most employees, I have to constantly justify my existence. The money is great, it has to be as I have to pay my own super, sick/holiday leave, training, accounts, end of year accountant and the list goes on. I'm a sole trader and happy at that. People have said I should expand and employ staff….but that is really expensive…I then have to pay the staff member, their perks, leave, super, maternity leave etc etc. I sometimes wonder how small businesses can even afford to employ people.
So if your employer is only offering you 15% more, they are trying to pull the wool over your eyes, it will be a big boost for them plus it will be easier to get rid of you.
@brispaul: Well said mate
Totally not worth it. Even if they want to keep your leaves the same. You lose out on so much in the case they want to terminate your contract (as other mentioned above).
Also the fact that you have work there for 5 years, in another two years you will begin accumulating long service leave as well. I don't think you can argue that the leaves they promised you will include long service leave.
With the new employee/contractor debate going on atm, this will not pass any test for both sides. You will get caught under the PSI rule and still get taxed the same as you are now (some may say that you will get deduction for purchase up to $20,000 for any work related items, but the first rule of thump in tax is you gotta spend money to get the deduction :), similarly you gotta pay tax to get a refund).
I dunno whom are those accountants who recommended this solution to the company, this sounds really dodgy to me.
https://www.ato.gov.au/law/view/pdf/pbr/tr2005-016.pdf
Just because you have an ABN doesn't make you an automatic contractor. You could still be determined as a common law employee
15% increase will definitely not be enough.
What extra tax do you have to pay (eg. payroll tax)?
What extra fees do you have to pay (eg. Liability/Travel Insurance fees)?
Also bear in mind your income WILL be higher hence you will be paying more tax.
Your take home income (after all the expenses and tax) most likely will be lower if it is only a 15% increase.
Plus you have to factor in
- No paid leave or sick leave
- No training
- No job security
800K before tax? Who cares, you get plenty enough not to be concerned about a couple of tens of thousands…
It's $800 per week
No don't do it. You leave long service leave and you will have less protection rights.
No leave or sick days
Working full time @$800/week = $41,600 (800x52)
Contractor full time @$920/week = 47,840 (920x52)
With Leave (4 weeks)
Full time = $41,600
Contractor = 44,160 (920x48)
Add Sick leave (2 weeks but we'll say 1)
Full time = $41,600
Contractor = 43,240 (920x47)
Most likely can't claim expenses as you are considered full time by the tax man. So only $1640/year more for no security, take his work on super which they can change anytime and you can't do anything about except complain and leave. And maybe lose long service leave? Is that worth $32/week?
Add you super into the rate, so 25%, and security at least 5%. 30% minimum but he's paying your super to you and it's in your contract your rate, not just a shake of hands.
I'm not saying they'll rip you off on purpose, but if business is not going well………………
.. and don't forget approx 10 public holidays
Ask to be made redundant, get the payout, then take the new role (with different/more senior title) as the contractor on more pay. See if you can negotiate a 25% increase
Yep, employer should not be able to transition from full-time to contract without making your full-time role redundant.
Your giving away too much security moving from full-time to contract, you should expect 1.5-2 times your original salary, on the plus side, you should be able to work for other employers and increase your deductibles
OP. they don't want to pay you out your long service leave. They can also terminate your agreement without paying you out. Do not do it.
I think the rule of thumb is to take your annual salary to work out your belt rate.
Here's what I was told to use by a recruitment agency.
Salary 50k , contract 50 bux per hour
100k, 100ph
Obviously length of contract is a big factor in the hourly rate.
I don't think that is quite right.
What is not right about it?
$100K does not equal $100 ph.
$100ph gives you close to $200,000.
About 160k when you take out what you loose in leave entitlements.. So about 50% increase to lose job security.. Or less if the contract is greater than 6 months.. Eg 40% etc…
@thierry: $160K still seems low. Leave entitlement is about 4 weeks? Sick leave about 1 week? Long service leave about 1 week?
@congngo:
You want to work on a 46 week year
4 annual
2 public holidays
2 sick leave
I didn't count long service..
So basically you want as a minimum 8 weeks factored into your hourly and then what ever you want as a premium fir job security and skills available in the market.
Simple answer is no, do not do it. Do you think the employer is looking out for you or himself?
1. No annual leave
2. No sick leave
3. No maternity/partenity leave
4. No long service leave
5. No redundancy payout if let go
6. No job security.
Super is questionable as well. Lots of cases where employers have not paid super.
Of course if he was paying you a lot more than a measly 15% than maybe you would consider it.
If you are a true subbie, you can take the package, hire someone from 7-11 on minimum wage, have them do the job and go home and put your feet up.
As a subcontractor it should be your decision how much time you allocate to getting the job done and no need to work exclusively for the one company.
If you can
become more efficient,
cut back your hours ,
pick up some more work at a different company and end up earning much more than the extra 15%
then you would be a genuine subbie.
Not sure if it has been mentioned that you would have to pay for insurance and complete a BAS, maybe pay for an accountant.
Down the track you may find the super agreement is cancelled and you are required to provide tools, vehicles etc as the company realizes that these things need to happen to differentiate you from a true employee and pass the sub-contractor test.
When you say 15% on top including leave is this 52 + 4 + 2 + 0.87 you need 15% on top of 58.87 week pay for this. You also may be losing on parental leave or study benefits depending on the company.
Another thing to consider is you may be required to provide a person to cover your absences for holiday , sick or bereavement.
Are you going to be free to do work for multiple companies, be free to subcontract out the work, work on your own schedule, and only be responsible for deliverables, not for hours of work or reporting to management?
If the above doesn't apply, it is a sham contract, and they are breaking the law by offering it.
There are concrete parameters for whether someone is a contractor or an employee, and the ones above are some of them.
If you're still going to be expected to work normal hours, on their premises, have no ability to subcontract, and are expected to report to management like any other employee, then by definition you are an employee, and they are not permitted to shift you onto a contract.
There are no concrete parameters, just factors a court will generally consider in determining whether you are one or the other should a dispute arise. The totality of the working relationship is looked at to determine this, no one factor is more important than the other, up to court to determine this.
This is a good list: Sham contracting
Alone however it is only a civil remedy. But once established you can use that and chase up other things like pay, lost super, lost leave, etc.
It's pretty much certain that if you're working an office job, and have a position that fits neatly into an Org Chart, then you're not a contractor.
Or if you're working doing deliveries, and are expected to do fixed hours, and have no scope to accept or refuse specific jobs, then you're not a contractor.
But "sham contracts" are widely used in both these situations, and they're entirely illegitimate.
One thing not oft cited are the industry standards. Quite common for an IT or engineering consulting contactor to meet all those factors yet still be a valid contractor (however they are normally paid in excess of $100k - $300k pa and can pay their own legal fees. Normally not simple pay disputes either but rather stuff like construction of a contract or a parking spot to disputes about legal liabilities.)
All these other factors would be good indicators for people who can't afford legal fees (commonly truck drivers, construction workers and contact cleaners) in simple things (eg disputes with award wages / super / sham contacting.) You can say you meet all factors but at the end it's at the whim of the judge or magistrate.
No annual holiday, public holiday or any other holiday payment
No sick leave & you have provide service even your sick otherwise you might need to face legal action
NO work cover , you have to arrange your own insurance
you should have Public liability insurance
you may need to have professional indemnity insurance
Additional accounting cost
personally i think you should have +50% cover all of above
It has been said already, but as a contractor I will highlight it again.
Remember for every Dollar you earn you have to consider:
No annual leave
No leave loading
No sick leave payments
No overtime - unless agreed to in your contract
No work no pay
Professional indemnity insurance
Public Liability Insurance
Workers Comp insurance
Superannuation ("look After' doesn't mean anything)
BAS Preparation Time
Invoicing time for work performed.
Accounting Reconcilliation time
Annual Company tax preparation - if you are a company
All expenses are your own - phone calls, faxes, car running costs ?
I used to baulk at tradie rates, but most of them are self employed and have to pay/consider all of the above.
Fair go, tradies dont get paid for every hour they work… they do a lot of running around that is unpaid, free quotes, supplies etc. THey arent on the gold mine some paint.
Hence the service call fee. I have no issues with that, as it is part of their day.
I do however have an issue with a specific tradie that quoted me verbally $600 to change a service fuse on my fusebox that had a hot joint on a Sunday.
He then invoiced me:
$600 replace fuse
$120 call out fee
72 GST
792 TOTAL
I laughed at him and told him he had 2 options:
1) take my $600 or
2) take his fuse back and leave it the way he found it.
He took my $600
I know I was being overcharged at $600 for 40 minutes work, but it was a Sunday and it was Dangerous to leave it as it was, and he was a level 2 Electrician that was licensed to work on live boards.
It's not only 40 mins. Someone has to pay them for the time they are waiting. If someone called me on my day off and wants me to do stuff even if it took 5 mins I would demand at least two days pay.
If u want Sunday service, come to my house now service expect to pay for them to also sit on their arse waiting for your call.
Depends on the trade, All the self employed plumbers I know are rolling in it, and its not shit they are rolling in.
You've been watching to much a c a - don't know if that's still on, don't watch Aussie tv.
All true except for I don't remember the last time a tradie didn't want cash in hand AND $150 hour
I am also looking at this arrangement. Does anyone know of a generic contractor agreement I can get off the web for Australia?
My first comment on OZB :)
Don't settle for what you've been offered OP. Ask for a payout for the 5yr service so far - if they agree then something to think about..
Yeah this seems dodgey as. I changed from permi to contract at my same role when they shut down the branch and relocated everyone. I wasn't happy with the relocation package and offered that id relocate if they made me a contractor.
I had to have a 2 week stand down period between permi and contract. This was in the UK though.
Anyway I'm still contracting for them 14 years later, teleworking from the other side of the world now lol. But my rate is still the same as it started on back in 2001 (lucky I pushed for a decent rate about 3x my salary at the time), such is the IT employment market since then. I'm actually lucky to still have a job lol.
In my case I wanted the flexibility and extra cash of contracting, and they wanted a relocated worker who could hit the ground running, so we both got what we wanted out of the deal. This deal of yours looks like some kind of scam. I'd take the redundancy route and get your payout you are entitled to, then negotiate about contracting after the cash is in your hand. Because it seems to me that there is something weird going on behind the scenes, and you need to cash out while you can.
Be careful with this.
http://www.smh.com.au/small-business/finance/companies-forci…
sounds like a case of 'sham contracting'. This is related.
http://forums.whirlpool.net.au/archive/2136908
Read the papers carefully before you sign and make sure you're not the one getting the short end of the stick! It's most likely that your working conditions will deteriorate (e.g no more paid leave, no more overtime pay) once you become a contractor.