When is a worker an independent contractor or an employee? Plenty of people ask this question as it can expose businesses and individuals to significant risk and costs under tax and employment law.<\/p>\n
Sometimes, a person might seek a contracting relationship for perceived tax benefits or the company might want to keep employment flexible. However, by law, it is the nature of the employment relationship that defines whether someone is a contractor or an actual employee. No one can opt-out of basic employment standards and entitlements or their statutory tax and superannuation requirements.<\/p>\n
So what are the differences between a contractor and an employee? Let\u2019s break it down.<\/p>\n
Employees<\/strong><\/p>\n \u2022 People working in a contract \u201cof service\u201d, serving the employer under a relevant award, agreement, or employment contract. Contractors<\/strong><\/p>\n \u2022 People working in a contract \u201cfor service\u201d, serving themselves by delivering outcomes to their client(s). The nature of the employment situation is usually obvious, although project work of fixed duration or finite funding can be complicated. If you\u2019re still not sure, this article has more practical information and tests for differentiating between employees and contractors.<\/p>\n https:\/\/www.ato.gov.au\/business\/employee-or-contractor\/<\/a><\/p>\n
\n\u2022 Considered part of the business and (generally) told how, where, and when they work.
\n\u2022 Dedicate their time and effort primarily to one organisation.
\n\u2022 Take no commercial risks and the business is legally responsible for the work done.
\n\u2022 Employer provides all or most equipment and systems for doing the work.
\n\u2022 Must apply for time off.
\n\u2022 Paid by payroll system, with PAYG and any fringe benefits deducted. Eligible for superannuation.
\n\u2022 Have all minimum rights under employment laws.<\/p>\n
\n\u2022 Self-employed, running their own independent business.
\n\u2022 Can work freely for a number of organisations (or sub-contract the work out).
\n\u2022 Dictate their own time off and may or may not be available for work.
\n\u2022 Take commercial risks and are legally responsible for their work.
\n\u2022 Use all or most of their own equipment and processes.
\n\u2022 Invoice for their work.
\n\u2022 Have most workplace rights but different tax, insurance, and superannuation responsibilities.<\/p>\n