The ACT Government says its new Workers’ Compensation Amendment Act, which was enacted last week, will limit opportunities for sham contracting by employers.

Sham contracting occurs when workers are hired as independent contractors rather than on employment contracts, thereby avoiding the need to pay workers’ compensation insurance, portable long service leave, superannuation and a range of other employment entitlements.

ACT Industrial Relations Minister Katy Gallagher says an increasing number of labourers, cleaners, tradesmen and service workers operate under the fiction of “contractor” by obtaining an Australian Business Number.

“These individuals have become a vehicle for employers to avoid paying workers’ compensation insurance for individuals who are legitimately workers,” she said.

Ms Gallagher says the commercial advantage of these contracting arrangements is so significant that the viability of businesses “doing the right thing” and protecting their workers is under threat.