Working out whether a worker is an employee or an independent contractor can be tricky. There are many things to consider, and it's not as simple as whether or not they have an ABN or send invoices.

To follow the law, businesses need to make sure they aren't treating employees as contractors.

Contractors

Contractors run their own business and sell their services to others.

Contractors:

  • often use their own processes, tools and methods to do their work
  • may negotiate their own fees and working arrangements
  • can work for more than one client at a time.

Contractors have workplace rights and protections. However, they have different responsibilities than employees around insurance, tax and super.

Understanding contracts

If you're a contractor, make sure you understand:

Differences between an employee and a contractor

In general:

  • Contractors work for themselves and are their own boss.
  • Employees work in someone else’s business. The employer controls how, where and when they do their work.

But you need to consider several factors when deciding whether someone is an employee or contractor. 

To help you decide:

If you’re still not sure, consider getting independent legal advice.

If you think your employer is incorrectly treating you as a contractor

A business incorrectly telling an employee they are a contractor is called sham contracting. This is illegal. 

If you think this is happening to you, you can contact the Fair Work Ombudsman.

Labour hire workers

A labour hire agency may hire their workers as either employees or contractors. The agency is responsible for providing their employees with employment entitlements such as leave.

When a business engages a labour hire worker, they pay the agency a fee for their services.

5 common employee or contractor myths 

Find out the truth behind these myths about whether someone is a contractor.

This is not true.

Hiring someone for a few hours or a couple of days at a time doesn't mean they're automatically a contractor. You can hire both employees and contractors for:

  • casual, temporary, on-call and infrequent work
  • busy periods
  • short jobs
  • specific tasks and projects.

This is not true.

Having an ABN is not the deciding factor of whether someone is a contractor. It depends on many factors of the working arrangement. 

This is not true.

Just because a person submits an invoice, it doesn't mean they're a contractor. You need to consider many factors.

This is not true.

Just because contract arrangements are common in your industry, it doesn't mean that you're a contractor.

This is not true.

If someone is legally an employee, having a written agreement that says they are a contractor doesn't:

  • override the employment relationship or make the worker a contractor
  • remove an employer’s tax and super obligations.

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