What is the difference between an employee and a contractor?

• The Fair Work Ombudsman has produced a table outlining 9 indicators to assist in determining whether a person is a contractor or an employee:
  • degree of control over how work is performed:
    • an employee performs work under the direction and control of employer on an ongoing basis; and
    •  a contractor has a high level of control in how the work is done;
  • hours of work:
    • an employee generally works standard hours while a casual employee’s hours may vary from week to week; and
    • a contractor decides what hours to work to complete a specific task;
  • expectation of work:
    • an employee has an ongoing expectation of work however some employees may be engaged to complete specific tasks on a short term basis; and
    • a contractor will usually be engaged for the duration of a specific project;
  • risk:
    • there is no financial risk to the employee as the employer manages risk; and
    • a contractor will bear the risk for profits or losses on each task and will have their own insurance to cover losses;
  • superannuation:
    • the employer pays the superannuation of the employee; and
    • a contractor generally pays their own superannuation;
  • tools and equipment:
    • an employee generally has either a tool allowance or the employer provides tools and equipment; and
    • a contractor generally use his or her own tools unless the contract of service provides otherwise;
  • tax:
    • the employer deducts income tax from the employee’s wages; and
    • a contractor pays their own tax and GST to the ATO;
  • method of payment:
    • an employee is paid regularly; and
    • a contractor must have their own ABN and submit invoices for work completed;
  • leave:
    • an employee is entitled to receive paid leave; and
    • a contractor does not receive paid leave.

To access a table online go to: http://www.fairwork.gov.au/about-us/policies-and-guides/fact-sheets/rights-and-obligations/contractors-and-employees-whats-the-difference