Supply Chain Integrity Review

Most Australian executives with “contractors” in the Philippines are blissfully unaware that this is equivalent to sham contracting in Australia. The Philippines Supreme Court uses a fourfold test to assess if a genuine employer-employee relationship exists. One of four pillars is the control test, which determines how much control you have over how the work is performed:

  • Do you dictate how the work is to be undertaken?
  • Do you ask for the work to be done during specific work hours?
  • Do you ask for the work done with your computer or business software?

If the answer is yes to any of these questions, there is sufficient evidence to demonstrate a genuine employer-employee relationship exists. Thus, you are obligated to pay on behalf of your employees their compulsory government mandated contributions and remit compensation tax to the Bureau of Revenue (BIR). Deeming your contractor as “self-employed” and trying to pass on the obligation to your so-called “contractor” to pay their compulsory government-mandated contributions and remit income tax to the BIR is not compliant. This is no different from sham contracting in Australia.