What is an Employee and what is a Contractor?
An independent contractor works under a contract for a specific job or length of time. For example, a plumber is hired to fix a leak.
Unlike an employee, an independent contractor generally doesn't work regularly for an employer, and can choose whether or not to do a particular job they're offered.
There are a number of indicators to help tell the difference between an employee and an independent contractor.
Here's some general guidance on the differences between employees and independent contractors.
Note: No single point below makes a person either an employee or independent contractor.
Employees
- Perform work, under the direction and control of their employer, on an ongoing basis.
- Generally work standard or set hours.
- Bear no financial risk (this is the responsibility of their employer).
- Are entitled to have superannuation contributions paid into a nominated superannuation fund by their employer.
- Have income tax deducted by their employer.
- Are paid regularly (eg. weekly / fortnightly / monthly).
- Are generally entitled to get paid leave (eg. annual leave, personal / carer's leave, long-service leave) if they are a permanent employee.
Independent contractors
- Decide how to carry out the work and what expertise is needed to do so.
- Bear the risk for making a profit or loss on each job.
- Pay their own superannuation and tax, including GST.
- Generally have their own insurance.
- Are contracted to work for a set period of time (for example, 2 months), or to do a set task.
- Decide what hours to work to complete the job.
- Generally submit an invoice for work completed or are paid at the end of the contract or project.
- Do not get paid leave.
This information comes courtesy of Fair Work Online which is the government resource for the Fair Work Australia Policy.