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The hidden cost of misclassification: Australia’s workforce is transforming, and fast, writes Job van der Voort.
Australia’s workforce is transforming, and fast. Something I find fascinating to observe is how many businesses are racing to modernise their customer strategies without placing equal or enough emphasis on updating their employment frameworks in tandem. When a business’s core is the quality of its people, this consistently surprises me.
When it comes to outdated modes of employer relations, no issue is more apparent today than the way companies engage with freelance and contract workers. In Australia especially, there’s a persistent issue with worker misclassification that is now so much more than a mere compliance risk – it’s a strategic talent and brand liability that businesses can’t afford to overlook.
The legal implications of misclassification
Recent High Court decisions in Australia (including ZG Operations Australia Pty Ltd v Jamsek and CFMMEU v Personnel Contracting Pty Ltd) have thrown the complexities of contractor versus employee classification firmly into the spotlight. These rulings reinforced the importance of clear, contract-based arrangements in determining employment status as well as revealing how fragile and outdated our current frameworks are.
If you couple this with the recently updated advice from the ATO saying you as an employer are responsible for classifying your worker for tax and super purposes, you have a perfect glimpse into why accurate worker classification has become a firmly entrenched compliance requirement.
Remote’s recent Global Contractor Management report found that nearly 40 per cent of companies globally are now hiring international contractors. Nowhere more so than the heavily regulated Australian market do organisations find themselves faced with the increased complexities and risks associated with more freelancers and contractors on their books. These challenges range from administrative burdens to compliance issues and the danger of misclassifying workers as independent contractors rather than employees, resulting in legal consequences we’re likely to see escalate locally.
Impacts on employer branding
In an era where talent is global and reputations travel fast, treating contractors as second-class citizens, whether through intentional misclassification or operational neglect, has the potential to harm a company’s employer branding and limit access to top talent.
If businesses fail to classify, pay, or engage them appropriately, they risk being labelled as exploitative or careless. They will invariably become a brand reputation that top freelancers will avoid, and one that permanent talent increasingly rejects, too. In a tight labour market, where skills shortages are biting across tech, healthcare, finance, and consulting, no company can afford to alienate valuable talent segments.
Outdated systems at risk of sabotaging the freelancer experience
Beyond classification, the operational experience businesses provide their freelance workforce is equally critical. Too often, companies rely on cumbersome, fragmented processes to manage independent talent, including paper-based contracts and opaque payment cycles. Relying on antiquated processes to manage a growing segment of your workforce creates inefficiencies, damages relationships, and increases the risk of compliance errors.
Worse still, with changes to the Fair Work Legislation, which came into effect earlier this year, intentional underpayment of wages, superannuation or entitlements can now attract criminal penalties for both companies and individual executives.
Paying independent contractors can be tricky, especially if you operate across multiple markets, and it’s vital to have the right systems in place to make sure everyone is paid fairly and on time.
This should be a wake-up call for business leaders to modernise their contingent workforce management. Relying on decades-old processes to onboard, train, manage, and pay a growing, highly mobile workforce is no longer a sustainable option.
Australia’s policy lag is a competitive threat
There’s a broader, structural issue at play, too. Australia’s industrial relations framework is struggling to keep pace with the realities of a blended workforce. The persistent stereotype of freelancing as a risky, fringe pursuit for the young or desperate is long outdated.
Increasingly, we’re finding it’s experienced specialists and cross-border professionals who choose contract work, and their expectations around pay, protections, and professional recognition are rising. Australia risks falling behind if it doesn’t quickly evolve labour regulations and company policies to reflect the realities of a borderless, age-diverse freelance economy.
The solution extends further than updates to legislation. It’s actually a matter of sound business leadership. Companies that proactively embed fair, transparent, and efficient freelance engagement practices will win both reputational capital and access to top talent.
As an HR leader of your organisation, you have the power to make this happen. That means encouraging investment in technology that simplifies freelancer classification and onboarding, committing to fast, fair payment practices, and creating pathways for contingent workers to contribute meaningfully within organisational culture. Streamlining contractor management can ease administrative burdens, reduce compliance risks, and ensure swift and accurate payments. Given the complexity of international employment regulations, most organisations struggle to manage these responsibilities alone. Centralised systems and solutions can help reduce friction in these processes and facilitate compliance, particularly when navigating unfamiliar regulatory landscapes.
In 2025, treating freelancers as second-class citizens is no longer defensible. Australian businesses have an opportunity to lead on this issue, modernising not just in compliance, but in care. Because in a talent market that is this competitive, how you treat your freelancers isn’t a side issue. Your business’s reputation is also at stake.
Job van der Voort is the chief executive and co-founder of Remote.
