Is your contractor really an employee?

It is a common misconception that when you engage contractors, it is a much simpler arrangement which simply requires the contractor to get an ABN, provide an invoice and then your business can wash its hands of any further responsibility.

In fact, it is quite the opposite. You now need to complete an assessment of the contractor arrangement to determine if you are still responsible for a wide range of EMPLOYMENT related obligations.

Some cases are clear cut, but many are not (quite often they are complex and unclear) and the implications of failing to treat your contractors correctly for matters such as Super, Workcover and Payroll Tax can be severe.

This is not to mention the employee entitlements they could be entitled to under the National Employment Standards.


The critical differences between an employee and independent contractor are:

  • an employee serves in your business, and performs their work as a representative of your business
  • an independent contractor provides services to your business and performs work to further their own business.

It is crucial that you accurately characterise the nature of the business that you carry out. You should examine the essential activities of the business that you operate and compare them with the legal rights and obligations contained in the contract you entered into with the worker.

Although the old multifactorial test is no longer used, the same indicia are still relevant in considering whether the worker is working in your business, taking into account only the legal rights and obligations between you and your worker.

We provided a presentation on this topic to the Douglas Chamber of Commerce. His presentation can be found in the following link:

Contractor v Employee

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