The difference between employees & contractors

If you own a business that hires workers, and especially if you use contractors, it is important that you understand the difference between an employment relationship or a contract for services. It is important to know that even if there is a written contract stating the worker is either an employee or contractor this does not define the relationship. Instead, it is determined by examining a range of characteristics of the working relationship.

So, Employee or Contractor?

It is essential to understand whether your hired worker is an employee because if they are, they have different entitlements to contractors. For example, employees under the Fair Work Act 2009 (Cth) are entitled to employment standards like minimum wages and leave entitlements. Employees can also rely on unfair dismissal terms whereas contractors are not able to. Another difference is that as an employer you must pay your employees superannuation.

So, how do you know if your worker is a contractor or an employee?

There are a variety of factors that determine whether a worker is an employee or a contractor. It is decided by analysing the relationship as a whole and there is no decisive list, however below are a few common factors that can be taken into account.

Some factors common to contractors:

• Provides own equipment
• Decides when they work
• Has control over their work
• Is paid per piece or per task
• Can subcontract and work for other businesses

Some factors common to employees:

• Receives sick and holiday pay
• Works on site
• Is not responsible for the maintenance of equipment
• Wears a uniform
• Has tax and superannuation handled by employer

Often a worker may have some factors pointing towards being a contractor and some leaning more towards employee. Ultimately, defining the relationship is a balancing exercise.

If you have any questions about your employees, feel free to contact one of our experienced lawyer at Frank Law on (02) 9688 6023.

This is not legal advice.