To determine whether a worker is an employee or an independent contractor based on the legal rights and obligations (that is, the terms) in the contract you entered into with your worker, one factor to consider is whether your business, or the worker, controls the way the work is done.
Your business controls the way the work is done
This is a characteristic of an employee.
Your business controls the way the work is done if your business has the right to direct:
- what work the worker does
- where the work is done
- how the worker carries out the work
- when the worker completes the work; for example, your business sets the worker's hours.
Example: business controls the way work is done
A telecommunication business hires a worker to answer inbound calls in its call centre.
The business has a computer system that automatically routes phone calls to call centre workers based on their knowledge skill set. The call centre worker must answer each phone call according to the business's procedures and scripting.
Under the contract between the telecommunication business and the call centre worker, workers have 5 shifts each week, which the business rosters. Workers are supervised and must perform their work in accordance with the business's practices and procedures
The business controls the way the work is done, as they direct what, where, how and when the work is done.
End of exampleWorker can decide the way the work is done
This is a characteristic of an independent contractor.
The worker can decide the way the work is done if they are free to exercise their discretion in completing the work (subject to the terms and conditions in any contract or agreement).
A business has the right to specify how the contracted services are to be done. However, such control must be specified in the terms and conditions of the contract or agreement; otherwise the worker is free to exercise their own discretion.
Example: worker can decide the way work is done
A large domestic house builder uses several stylists who create personalised interior solutions for its display homes.
Under the contract between the domestic house builder and the stylist, each stylist is assigned a job to fully fit out and decorate one display home. They liaise with the architect to understand the styling and furnishing needs specific to the intended purchasers of that house. The stylist creates the design and can choose their own suppliers.
The stylists determine how best to complete each job within the agreed budget and timeframe the builder has specified. Each stylist can decide the way the work is done, as they are free to exercise their discretion in completing the work.
End of example