Should Your Dance Studio Staff Be Contractors or Employees?

One of the most frequently debated topics in the dance studio industry is whether staff should be classified as contractors or employees. It’s a crucial distinction that can have significant legal and financial implications for your business.

While it may seem like a gray area, Australian regulations make it quite clear: most dance teachers should be classified as employees.

If you’re currently hiring teachers as contractors, you’re not alone. Many studio owners are still in the process of transitioning to employee-based models. However, understanding the reasons behind this shift can help you make informed decisions that benefit both your business and your staff.

The Legal Perspective: Employees vs. Contractors

One of the most common misconceptions is that if a teacher has an ABN and is registered for GST, they qualify as a contractor. However, under Australian tax law, this is not the case for most dance teachers.

The Australian Tax Office (ATO) provides a clear tool that allows business owners to determine whether a worker should be classified as an employee or a contractor. In every scenario applicable to dance studios, the result remains the same—dance teachers should be classified as employees.

The key distinction lies in how they work. Contractors typically:

• Work independently and provide services to multiple clients

• Supply their own tools and resources

• Set their own hours and methods of work

On the other hand, employees:

• Work under a set schedule determined by the employer

• Use the business’s tools and resources (e.g., crash mats for acro classes)

• Are provided with ongoing work rather than one-off projects

A useful analogy is comparing a dance teacher to a plumber. If a plumber comes to fix a leak, they complete a job and leave—they are a contractor. But if they were scheduled to show up every Tuesday at 4 PM to perform the same service regularly, they would be considered an employee.

Transitioning Staff from Contractors to Employees

Many studio owners hesitate to make the transition because it seems overwhelming. However, delaying the change can lead to serious financial risks, including fines and back payments for unpaid superannuation and taxes.

If you are making the shift, consider:

1. Consulting an Accountant or Lawyer – Get professional guidance on how to transition your staff smoothly.

2. Educating Your Teachers – Many teachers assume they’re getting a pay cut when switched to employee status. However, they are still receiving the same pay; it’s just structured differently with taxes and superannuation withheld.

3. Highlighting the Benefits – Employees gain more financial security, including access to paid sick leave, holiday pay, and protections under workplace laws.

4. Choosing the Right Time – A great time to implement changes is at the start of a new financial year (July 1st in Australia) to allow proper planning and budgeting.

Understanding Pay Rates and the Fitness Industry Award

A major concern for studio owners is how much to pay their staff. Dance teachers fall under the Fitness Industry Award, which outlines minimum pay rates based on experience and qualifications.

The award levels range from Level 1 (junior assistants) to Level 7 (highly qualified instructors with formal certifications). The highest award rate, at Level 7, is $35.08 per hour. While many studios pay above this rate, understanding the award provides a solid baseline for fair pay structures.

If a teacher requests a pay rise, consider:

• The Value They Bring – Are they helping grow class numbers? Do they contribute to studio marketing (e.g., social media promotion)?

• Sustainability – Is their requested rate feasible for your business long-term?

• Industry Comparisons – Are they comparing their pay to freelance instructors who do their own marketing and client acquisition?

It’s also important to manage pay negotiations effectively. Teachers should approach discussions professionally and provide reasons why they believe they deserve a raise. As a studio owner, knowing your financial numbers helps take the emotion out of these discussions and ensures fair, informed decisions.

The Bottom Line

While transitioning from contractors to employees may seem daunting, it is an essential step to ensure your business complies with legal requirements and operates sustainably. Employees receive better protections, while studio owners gain peace of mind knowing they are following the law.

If your staff question why other studios still hire contractors, stand firm in your decision. Legal compliance is non-negotiable, and ensuring fair treatment of employees will ultimately benefit your studio’s reputation and long-term success.

By knowing your numbers, setting clear expectations, and properly communicating the transition, you can create a thriving business model that benefits both your studio and your teaching staff.