How do I know if I am an independent contractor?
You'll need to determine whether you are classified as an independent contractor before entering a contract. Your status will affect your rights and obligations with your employer or the business you contract with. You can be an employee for some work and an independent contractor for other work.
The individual circumstances of a working relationship are important in determining whether you are an independent contractor or employee. Use the Independent contractors decision tool to see whether the courts are likely to consider you an independent contractor under common law.
Are you an independent contractor or an employee?
An independent contractor:
- has established his or her own business
- is usually paid to achieve an agreed result
- usually provides skilled services
- generally controls how those services are provided
- may be free to subcontract the work to others
- is free to refuse additional work
- often supplies the material or special tools to complete the job
- usually bears the risk and cost of fixing their faulty work
- can advertise to the general public
- usually has no right to employee entitlements such as paid leave.
For example, an independent contractor might be hired to perform a specific job or series of jobs and often provides specialist skills and materials.
Having an Australian Business Number (ABN) doesn't automatically make you an independent contractor.
Employees are entitled to a minimum set of conditions under workplace relations law that independent contractors aren't entitled to. These include:
- payment of wages
- set hours of work
- leave entitlements.
Usually, an employer can direct the way employees work. Independent contractors have more control over how they work.
- is usually supervised by an employer
- is usually required to carry out their work in a particular way, and comply with directions to perform work differently from time to time
- may be required to work only for one employer
- is entitled to paid holidays and sick leave
- is often required to represent to the public that they work for the employer (for example, by business cards, uniforms etc)
- generally cannot subcontract tasks given to him or her. A typical employee earns a fixed wage or salary and works in the business operated by the employer on a permanent, fixed term or casual basis. An employee's employer usually controls how their work is performed.
Other state and federal laws that define a worker
Independent contractors are classified differently under different state, territory and federal laws. Your classification may be determined by the state you undertake the work in and whether the service is provided to more than one employer. Make sure you take your state/territory laws into consideration.
What to do...
- Use the Independent contractors decision tool to help determine your status.
- Find out about independent contracting in your state or territory.
- Visit the Employee or contractorpage on the Australian Taxation Office (ATO) website or phone the ATO on 13 28 66 to find out about contractors and taxation.
- See Independent contractorsfrom the Department of Industry, Innovation and Science.
- Visit the Fair Work Ombudsman's website for further information about contractors and employees.