Independent contractors

Independent contractors

Independent contractors run their own business, hiring out their services to other organisations.

Unlike employees, independent contractors negotiate their own fees and working arrangements, and can work for a variety of clients at one time. If you have specific expertise, independent contracting can be an ideal way of capitalising on your knowledge.

As an independent contractor, your entitlements and obligations differ from an employee in many ways. Save time and money by being aware of your rights and responsibilities before contracting.

How do I know if I am an independent contractor?

You'll need to determine whether you are classified as an independent contractor before entering a contract. Your status will affect your rights and obligations with your employer or the business you contract with. You can be an employee for some work and an independent contractor for other work.

Are you an independent contractor or an employee?

An independent contractor:

  • has established his or her own business

  • is usually paid to achieve an agreed result

  • usually provides skilled services

  • generally controls how those services are provided

  • may be free to subcontract the work to others

  • is free to refuse additional work

  • often supplies the material or special tools to complete the job

  • usually bears the risk and cost of fixing their faulty work

  • can advertise to the general public

  • usually has no right to employee entitlements such as paid leave.

For example, an independent contractor might be hired to perform a specific job or series of jobs and often provides specialist skills and materials.

Having an Australian Business Number (ABN) doesn't automatically make you an independent contractor.

Employees

Employees are entitled to a minimum set of conditions under workplace relations law that independent contractors aren't entitled to. These include:

  • payment of wages

  • set hours of work

  • leave entitlements.

Usually, an employer can direct the way employees work. Independent contractors have more control over how they work.

An employee:

  • is usually supervised by an employer

  • is usually required to carry out their work in a particular way, and comply with directions to perform work differently from time to time

  • may be required to work only for one employer

  • is entitled to paid holidays and sick leave

  • is often required to represent to the public that they work for the employer (for example, by business cards, uniforms etc)

Independent contractors & the common law

The Independent Contractors Act 2006 relies on the common law meaning of independent contractor. The common law is a set of legal principles, which have been developed through decisions in the courts. To determine whether a person is an independent contractor or an employee, a court considers a number of factors which look at the entire working relationship on balance.

Generally, an independent contractor works to achieve results and maintains a high level of discretion and flexibility as to how work is performed. However, the contract may set out precise terms around materials used and methods of performance, and still be a contract for specific services. These are only some of the factors courts take into account.

In making a decision, courts consider the individual circumstances of a case and provide recognition to the key characteristics of employees and independent contractors.

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