Employee or contractor?
The difference between an employee and a contractor depends on many different factors. No single factor or combination of factors will determine a worker’s status.
In most cases, independent contractors:
- work for themselves and are their own boss
- are free to accept or refuse work
- control their own working times
- provide their own tools and equipment.
In contrast, employees:
- work in someone else’s business
- are subject to controls on how, where and when their work is performed
- are paid a wage
- receive employee entitlements, such as sick and annual leave.
What to do if you aren't sure if you are an employee or contractor
- If you're a worker, use the Independent contractors decision tool to help you decide your employment status.
- If you're an employer, use the ATO’s online tool to decide if a worker is an employee or contractor for tax and super purposes.
- If you believe your employer is incorrectly treating you as a contractor, contact the Fair Work Ombudsman (13 13 94) or the Australian Building and Construction Commission (1800 003 338) if you work in the construction industry. This could be ‘sham contracting’.
- Seek independent legal advice.
Visit the Fair Work Ombudsman website for additional information on employees and contractors.
Independent contractors decision tool
The Independent contractors decision tool gives an insight into whether someone is likely to be an independent contractor or an employee under common law. The tool will guide you through a set of questions and takes a few minutes to complete.
Five common employee or contractor myths busted
Myth 1 - People who do short-term work are automatically a contractor.
Just because someone is hired for a few hours or a couple of days at a time, doesn't mean they're automatically a contractor. Both employees and contractors can be hired for:
- casual, temporary, on call and infrequent work
- busy periods
- short jobs, specific tasks and project.
Myth 2 - Workers with an ABN are always contractors.
Having an ABN is not the deciding factor of whether or not a worker is a contractor. All of the conditions of the working arrangement are relevant.
Myth 3 - If someone provides an invoice for their work, it means they are a contractor.
Just because an invoice was submitted, it doesn't necessarily mean that the person is a contractor. Other factors also need to be considered.
Myth 4 - The majority of people in your industry are contractors, which means you should be too.
Just because contracting arrangements are common in the industry, it doesn't necessarily mean that a particular person should be treated as a contractor.
Myth 5 - There is a written agreement that says a worker is a contractor, so they must be one.
If a worker is legally an employee, having a written agreement will not:
- override the employment relationships or make the worker a contractor
- remove an employer’s tax and super obligations.