Hiring Personal Trainers: Contractor vs Employee — Getting It Right

The personal trainer space sits in a legal grey area that catches many gym owners completely off guard. You hire a PT, give them a licence agreement, collect a fee from them, and assume you have an independent contractor arrangement. But under Australian law, that PT may actually be an employee — and if they are, you owe them every employment entitlement they haven't received: annual leave, superannuation, the Fitness Industry Award minimum wage, and more.

This is sham contracting. It is not a compliance technicality. It exposes gym owners to significant back-pay liability, Fair Work penalties, and in some states, criminal prosecution.

This article explains how to tell the difference, what arrangements are genuinely legal, and what you need to do to get it right.

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Why This Matters More Than Ever

The Fair Work Legislation Amendment (Closing Loopholes) Act 2024 introduced the Employee-like Work Framework and expanded the Fair Work Commission's jurisdiction over independent contractors. From August 2024, workers who earn below the contractor high-income threshold and who are in an employee-like relationship can apply to the Fair Work Commission for minimum standards — even if they are technically classified as contractors.

At the same time, courts have been applying a stricter, substance-over-form test to employment relationships since the High Court decisions in CFMMEU v Personnel Contracting and ZG Operations v Jamsek (2022). The written contract still matters, but it is no longer determinative. The actual working relationship — how work is performed in practice — must also be assessed.

For gym owners running PT licence arrangements, this means your ABN/invoice model may not protect you in the way you think it does.

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The Core Test: Employee or Independent Contractor?

Australian law uses a multi-factor test to determine whether someone is an employee or an independent contractor. No single factor is decisive — the overall picture matters.

Factors pointing towards employee:

• The gym controls how work is performed (the PT must follow the gym's schedule, style, rules, and class formats)
• The PT works exclusively or primarily for one gym
• The PT cannot subcontract their work or send a substitute
• The PT is paid a flat hourly or session rate (not quoting for each job and taking business risk)
• The gym provides the equipment, space, and clients — the PT brings only their labour
• The PT works regular, consistent hours set by the gym
• The PT is integrated into the gym's operations (listed on the website as staff, wears the gym's uniform, uses the gym's booking system)
• The gym can terminate the arrangement at will without a commercial reason

Factors pointing towards genuine independent contractor:

• The PT runs their own business — they have their own ABN, insurance, and clients
• The PT quotes a fee for specific services and invoices the gym
• The PT can and does work for other gyms and clients simultaneously
• The PT can delegate work to others or bring their own subcontractors
• The PT provides their own equipment (where relevant)
• The PT takes business risk — if the work is done poorly, they fix it at their own cost
• The PT negotiates the commercial terms of the arrangement
• The PT can accept or refuse work without being penalised

The red flags for sham contracting:

The arrangement is most likely sham contracting if:

• The PT only works at your gym
• You control their hours, location, and client allocation
• You set the session pricing (not the PT)
• You can terminate the arrangement with short notice for any reason
• The PT is listed on your website as part of your team
• The PT has no meaningful ability to build their own client base

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Common PT Licence Models — What's Legal?

Model 1: Genuine Licence-to-Operate

The PT pays the gym a weekly or monthly licence fee for the right to use the gym's space, equipment, and facilities. The PT brings their own clients (or acquires them independently), sets their own session prices, and invoices their clients directly.

This can be a genuine contractor arrangement if the PT genuinely runs their own business — they have their own clients, their own pricing, their own insurance, and their own ABN, and the gym is genuinely providing nothing more than a space.

Model 2: Revenue Share or Commission

The gym provides clients to the PT. The PT delivers sessions and receives a share of the session fee, with the gym keeping the rest.

This arrangement is more problematic and frequently leads to employee classification, because the PT has no independent client base and is dependent on the gym for their income. The gym controls the client relationship, the pricing, and effectively the PT's earnings.

Model 3: Gym Employee

The PT is rostered, paid hourly or by the session under the Fitness Industry Award, and has no separate business relationship with the gym. This is straightforward employment and must comply fully with the Award.

Many gyms that use Model 2 arrangements should actually be using Model 3 — they just haven't been told.

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The High Court Has Changed the Landscape

Before the 2022 High Court decisions (Personnel Contracting and Jamsek), some businesses could rely heavily on the written contract to establish a contractor relationship — even if the practical reality looked more like employment.

The High Court clarified that courts must examine the contractual terms to determine the nature of the relationship, but where the contract is comprehensive and covers the relevant matters, courts give primacy to those terms. However, where a contract is incomplete or silent on key matters, or where the parties' conduct reveals a different arrangement, the actual working relationship remains relevant.

In practical terms: if your PT licence agreement says the PT is an independent contractor but the day-to-day arrangement is that they work your roster, follow your policies, and don't bring their own clients, there is real risk the contract will not protect you.

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What Happens If You Get It Wrong

Back-Pay Liability

If a PT who has been working as a deemed employee brings a claim, they can recover:

• Underpaid wages (compared to the Fitness Industry Award minimums)
• Unpaid superannuation (plus earnings on those amounts)
• Unpaid annual leave and personal leave
• Penalty rates they should have received
• Long service leave (if applicable)

For a PT who has worked at your gym for three or four years, the total back-pay liability can be substantial — tens of thousands of dollars in some cases.

Fair Work Penalties

Sham contracting — where an employer knowingly or recklessly misrepresents an employment relationship as a contractor arrangement — carries civil penalties under the Fair Work Act. The maximum civil penalty for a body corporate is currently over $18,000 per contravention (and potentially much more for serious contraventions).

State Criminal Wage Theft Laws

Queensland, Victoria, and other states have introduced criminal wage theft laws that can apply to deliberate underpayment of employees. While prosecutions have largely targeted large-scale underpayment, the legislation is on the books and gym operators who knowingly misclassify employees are not immune.

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Steps to Review Your PT Arrangements

1. Map out your current PT arrangements. For each PT, document whether they bring their own clients, set their own prices, work at other venues, and have a genuine independent business.

2. Review your PT licence or service agreements. Do they reflect the actual working arrangement? Are there terms that read like employment (e.g., requiring the PT to follow your service standards, work certain hours, or report to a manager)?

3. Assess each PT against the multi-factor test. If most factors point towards employment, the arrangement needs to change — either by restructuring it as genuine contracting or by treating the PT as an employee.

4. Seek advice if you are unsure. Employment law can be complex, particularly where arrangements have been in place for years. A workplace relations advisor or employment lawyer can help you assess the specific risk and restructure your arrangements properly.

5. Do not just change the paperwork without changing the substance. Presenting a PT with a new "independent contractor agreement" and continuing to treat them exactly as before is not a fix — it is a deeper form of sham contracting.

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The Practical Reality

Many gym operators run hybrid arrangements that are neither clearly employment nor clearly contracting. The risk profile varies enormously depending on the specifics.

The safest arrangements are:

• Genuine licence-to-operate models where PTs genuinely run their own businesses, bring their own clients, and have the ability to work elsewhere
• Standard employment under the Fitness Industry Award, with proper contracts, correct classification, and correct pay

The riskiest arrangements are:

• Revenue-share models where the gym controls client allocation, session pricing, and scheduling
• "Contractor" arrangements where the PT works exclusively at your gym, follows your roster, and has no independent business

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How Reguladar Helps

Reguladar's compliance dashboard tracks your employment law obligations — including upcoming Fair Work deadlines, Award updates, and obligation reviews. If you are a gym owner unsure about how your PT arrangements measure up, our health check tool can help you identify the specific risks that apply to your business.

Start a free compliance check at Reguladar — find out where your fitness business stands on contractor classification and other employment law obligations.

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This article is general information only and does not constitute legal advice. If you have specific concerns about contractor arrangements at your gym, consult a qualified employment lawyer or workplace relations adviser.