Contractor or Employee – Knowing the difference

Do You Hire Contractors?

When hiring workers, it is important to know the difference between contractors and employees for tax and super purposes.

Getting it wrong compromises your ability to meet tax and super obligations and can mean your workers miss out on employee entitlements.

If you misclassify workers’, you can also be caught out with penalties and charges.

There is no one deciding factor that makes a worker an employee or contractor.

You must consider the whole working arrangement, including questioning your worker’s:

  • Ability to subcontract/delegate: can the worker pay someone else to do the work?
  • Basis of payment: is the worker paid based on an agreed quote they provided?
  • Equipment, tools and other assets: does the worker provide their own tools and equipment needed to do the job?
  • Commercial risks: is the worker legally responsible for their work and liable for fixing mistakes or defects?
  • Control over the work: does the worker decide how to do the work, subject to specific terms in the contract or agreement?
  • Independence: does the worker operate their own business independently of your client’s business?

If you answer no to some or all of these questions, your worker is probably an employee and not a contractor.

You should contact us for advice before hiring or continuing to treat the workers as contractors.

Remember, if you take on an apprentice, trainee, labourer or trades assistant, those workers are always employees, never contractors.


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It would be my pleasure to assist you with all your tax and accounting needs, please contact me to book an appointment.