Employee or Contractor

February 24, 2021 News & Articles 0

“There are a number of factors to differentiate whether you hire are an employee or contractor”

It is important to check if your worker is an employee or contractor because it has an impact on your tax, super and other obligations. To determine whether your worker is an employee or contractor, there are few factors that need to be regarded, not just the aspects of the employment contract. In general, an employee works in your business and part of your business, while a contractor is running their own business.

Difference between Employee or Contractor:

Characteristics	Employee	Contractor
Ability to subcontract/delegate:	The worker can’t subcontract/delegate the work – they can’t pay someone else to do the work.	The worker can subcontract/delegate the work – they can pay someone else to do the work.
Basis of payment:	The worker is paid either: for the time worked a price per item or activity a commission.	The worker is paid for a result achieved based on the quote they provided. A quote can be calculated using hourly rates or price per item to work out the total cost of the work.
Equipment, tools and other assets:	Your business provides all or most of the equipment, tools and other assets required to complete the work, or The worker provides all or most of the equipment, tools and other assets required to complete the work, but your business provides them with an allowance or reimburses them for the cost of the equipment, tools and other assets.	The worker provides all or most of the equipment, tools and other assets required to complete the work The worker does not receive an allowance or reimbursement for the cost of this equipment, tools and other assets.
Commercial risks:	The worker takes no commercial risks. Your business is legally responsible for the work done by the worker and liable for the cost of rectifying any defect in the work.	The worker takes commercial risks, with the worker being legally responsible for their work and liable for the cost of rectifying any defect in their work.
Control over the work:	Your business has the right to direct the way in which the worker does their work.	The worker has freedom in the way the work is done, subject to the specific terms in any contract or agreement.
Independence:	The worker is not operating independently of your business. They work within and are considered part of your business.	The worker is operating their own business independently of your business. The worker performs services as specified in their contract or agreement and is free to accept or refuse additional work.