Employees vs contractors

It's important for both employers and workers to know the difference between an employee and a contractor.

Differences between employees and contractors

There are a number of areas to consider when determining whether your worker is an employee or a contractor.

Employees are usually:

1. given ongoing work and hours

2. paid superannuation by their employer

3. entitled to minimum wages and paid regularly

4. entitled to paid leave if they are permanent employees

5. not responsible for financial risk (for example, supplier invoices).

Contractors are self-employed and provide a service to a business. They usually:

1. negotiate how much they are paid for the work they carry out

2. carry the risk of making a profit or loss

3. pay their own insurance, superannuation and tax, including GST

4. contract themselves to work for a set time or task and decide what hours they work

5. invoice for their work or get paid at the end of the contract or project

6. decide whether to employ someone else to do the work (also called a subcontractor)

7. don't get paid leave.

It's important to consider each situation, as there is no single definition of a contractor. For example, your worker may be considered a contractor for taxation purposes, but an employee for other purposes.

Disagreements on whether you or your worker is an employee or contractor

If there is a disagreement, the courts in each state or territory can decide whether an individual is a contractor or employee.

You also need to remember that it's illegal to fire, or threaten to fire, an employee if they don't agree to become a contractor.

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