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A contractor is someone you pay to do work for you but isn’t your employee. They may be a sole trader or work in their own company, trust or partnership.

Contractors generally:

  • control when and how they do the work. This can include sub-contracting the work to others
  • set their own fees
  • use their own tools or equipment
  • are responsible for their own insurance, tax and super.

Other names for contractors

Some terms used for contractors are:

  • independent contractors
  • sub-contractors
  • freelancers, who usually work in creative industries, like music, writing or graphic design
  • consultants, who usually work in specialised professional fields. They give expert advice but may not put the advice into action.

Labour hire

You can also hire a contractor through a labour hire company. This means you pay the labour hire company to give you workers, rather than hiring the workers directly.

Read the Fair Work Ombudsman’s labour hire and supply chains page to understand how to manage labour hire contracting.

Reasons to hire contractors

Businesses use contractors for many reasons. It may be for short-term projects or to fill skill gaps among permanent employees.

Hiring contractors can:

  • be cost-effective – you don’t provide leave or super for contractors
  • allow your business to trial new positions
  • help scale your business up or down at short notice
  • give you access to people with specialised skills for a short time.

When deciding if you should hire a contractor, think about:

  • the tasks you need doing
  • how busy the job will be
  • any skills or qualifications needed for the job
  • how long you'll need someone for
  • if you have any skill gaps you need to fill temporarily.

If you’re unsure if your business needs contractors, consider getting help from a business adviser.

Things to do when hiring a contractor

Sometimes businesses misclassify workers as contractors when they are employees.

Deciding if a worker is a contractor or employee depends on a lot of factors. It’s not as simple as whether they have an ABN or send you invoices. 

You need to know if your worker is an employee or contractor so you can meet your legal obligations. Check the differences between employees and contractors. 

 

Contractors have different workplace rights and protections to employees. Make sure you understand these and your obligations. 

It’s important to understand different types of contracts and what they should include. This will help you negotiate and prepare contracts that work for both you and the contractor.

Things to consider:

  • In Australia a commercial contract is legally enforceable, regardless of whether it’s a verbal or written agreement.
  • International contract laws may apply if your contractor lives overseas.
  • Contractors can ask the Federal Court or the Federal Magistrates Court to review ‘unfair’ or ‘harsh’ contracts.
  • Getting professional advice can help you fully understand your obligations.

It’s important to know who owns any intellectual property (IP) your contractor creates.

If you want your business to own the IP rights, the contract must clearly say this. Otherwise, the contractor will own the IP of any work they create during the contract period. 

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