• Industry examples

    These examples show the differences between employees and contractors in various industries:

    Domestic painting

    This example shows the differences between an employee and contractor in domestic painting.

    Clarissa is an employee

    Vince is a contractor

    A domestic painter, Clarissa, works for a painting business on an ongoing basis. The business has told Clarissa she will be painting the interior of home units at a local retirement village for the next four weeks.

    A domestic painter, Vince, has been engaged by a local retirement village to paint the interior of some of their home units.

    Control over the work
    Clarissa is required to be at the retirement village from 8.00am – 4.00pm, Monday to Friday. Each morning the business instructs her about what work she will carry out that day.

    Employee characteristic – the painting business has control over the work.

    Control over the work
    Based on their agreement, Vince is responsible for preparing, priming and painting all interior walls of the specified home units in the colour the retirement village has requested. The retirement village requires Vince to complete the work during 5 January to 4 February between 7.30am and 5.00pm to limit disruptions, but Vince can choose how the work is undertaken.

    Contractor characteristic – Vince has freedom in the way the work is done, subject to the specific terms in the agreement.

    Ability to subcontract/delegate
    Clarissa has been hired by the business to do painting work and needs to personally perform the work requested of her.

    Employee characteristic – Clarissa cannot subcontract/delegate the work.

    Ability to subcontract/delegate
    Vince does not need to complete the work himself. He has an apprentice who will help in completing the work on the retirement village. Vince pays the apprentice weekly for the hours he works.

    Contractor characteristic – Vince can subcontract/delegate the work.

    Basis of payment
    Clarissa is paid an hourly rate for the time she works each week.

    Employee characteristic – Clarissa is paid for the time worked.

    Basis of payment
    Vince will be paid the amount he quoted to paint the interior of the home units once the work is completed to the required standards and timeframe.

    Contractor characteristic – Vince is paid for a specific result based on the quote he provided.

    Equipment, tools and other assets
    Clarissa uses the painting business's tools, equipment and materials.

    She drives her own ute to and from the worksite each day. The painting business requires Clarissa to have her own transport.

    Employee characteristic – the painting business provides the equipment, tools and assets required to complete the work. The ute is not being used to perform the work.

    Equipment, tools and other assets
    As specified in the agreement, Vince is required to provide the tools, equipment and materials required to complete the job.

    Contractor characteristic – Vince provides the equipment, tools and assets required to complete the work.

    Commercial risks
    If Clarissa does a substandard job, the painting business is responsible for the work completed. The business will tell Clarissa to fix the problem, but she will:

    • do the work during her standard working hours and the painting business will pay her for those hours
    • use the painting business's equipment, tools and materials to rectify the poor workmanship.

    Employee characteristic – Clarissa takes no commercial risks.

    Commercial risks
    If the standard of work does not meet the required standards, Vince will need to rectify the poor workmanship at his own cost.

    Contractor characteristic – Vince takes commercial risks.

    Independence
    Clarissa works on an ongoing basis for the painting business and must do any painting work they request.

    Employee characteristic – Clarissa is not operating independently of the painting business.

    Independence
    Vince regularly advertises his services and has several painting jobs booked in after the work at the retirement village is completed. If the retirement village needs further work done, he can choose whether he completes the work (depending on what other jobs are booked at the time).

    Contractor characteristic – Vince is operating his own business independently of the retirement village.

    Road transport

    This example shows the differences between an employee and contractor in the road transport industry.

    Ralph is an employee

    Toni is a contractor

    A truck driver, Ralph, works for a food manufacturing business and transports their products long distances to retail outlets across Australia.

    A truck driver, Toni, who leases a refrigerated truck, enters into a contract with a local seafood business to transport their products during the busy Christmas period.

    Control over the work
    The food manufacturing business requires Ralph to:

    • make deliveries according to their monthly schedule and procedures
    • complete and submit a logbook documenting his driving hours and kilometres.

    Employee characteristic – the food manufacturing business has control over the work.

    Control over the work
    The seafood business's products must be delivered for the period 1 November to 24 December in a specified delivery region.

    Provided the deliveries are made on the required day, Toni can determine how and in what order the deliveries are made.

    Contractor characteristic – Toni has freedom in the way the work is done, subject to the terms in the contract.

    Ability to subcontract/delegate
    Ralph is required to undertake the deliveries himself. If Ralph is unavailable, he needs to let the food manufacturing business know so they can organise and pay a replacement truck driver.

    Employee characteristic – Ralph cannot subcontract/delegate the work.

    Ability to subcontract/delegate
    The contract does not stipulate that Toni must personally make the deliveries. She can organise for another suitably licensed truck driver to make the deliveries, but is responsible for paying the other truck driver.

    Contractor characteristic – Toni can subcontract/delegate the work.

    Basis of payment
    Ralph is paid:

    • an agreed amount per kilometre he drives
    • for the number of kilometres he has travelled each month.

    Employee characteristic – Ralph is paid a price per item or activity.

    Basis of payment
    Toni is paid to transport the business's products during 1 November to 24 December and will receive an agreed amount per delivery made as per the contract and initial quote. She will issue an invoice and receive payment from the seafood business.

    Contractor characteristic – Toni is paid for a specific result based on the quote she provided.

    Equipment, tools and other assets
    The food manufacturing business provides Ralph with a refrigerated truck for his delivery schedule (it may be a different truck each time).

    Ralph uses the food manufacturing business's fuel card to purchase fuel at participating fuel stops along the route as required.

    Employee characteristic – the food manufacturing business provides the assets required to complete the work.

    Equipment, tools and other assets
    Toni will use the refrigerated truck she leases to make the deliveries.

    Toni purchases fuel with her own money from any outlet she chooses.

    Contractor characteristic – Toni provides the assets required to complete the work.

    Commercial risks
    If the refrigeration in the truck breaks down, the food manufacturing business is responsible for the cost of any spoilt stock. The business has taken out the relevant insurance.

    Employee characteristic – Ralph takes no commercial risks.

    Commercial risks
    If the refrigeration in the truck breaks down, Toni will be responsible for the cost of any spoilt stock. Toni has taken out the relevant insurance.

    Contractor characteristic – Toni takes commercial risks.

    Independence
    Ralph works on an ongoing basis for the food manufacturing business. He must do any work which is reasonably asked of him, including driving the truck on any routes the business gives him. Ralph cannot use the truck to do other work.

    Employee characteristic – Ralph is not operating independently of the food manufacturing business.

    Independence
    During the period of the contract, Toni is also undertaking deliveries for several other local businesses. She is required to perform the services as specified in the contract with the local seafood business, but can accept or refuse additional work from them.

    Contractor characteristic – Toni is operating her own business independently of the seafood business.

    Cleaning

    This example shows the differences between an employee and contractor in the cleaning industry.

    Catherine is an employee

    Karl is a contractor

    A cleaning business has a contract to clean a small office building. A cleaner, Catherine, who works for the cleaning business, cleans the building.

    A cleaner, Karl, has entered into an agreement to clean a small office building for one year.

    Control over the work
    Catherine is required to:

    • clean the building each weeknight from 6.30pm – 10.30pm
    • carry out the cleaning work as instructed by the business.

    The cleaning business does regular checks to ensure Catherine's work is meeting the required standards.

    Employee characteristic – the cleaning business has control over the work.

    Control over the work
    Karl has access to the building. The cleaning work can be done at any time after office hours, from 6.00pm until 8.00am.

    Karl is not given any direct supervision and can complete the cleaning work as he sees fit provided it meets the requirements of the agreement.

    Contractor characteristic – Karl has freedom in the way the work is done, subject to the specific terms in the agreement.

    Ability to subcontract/delegate
    If Catherine cannot do her shift, she can organise for another cleaner (who also works for the business) to fill in. Catherine needs to let the cleaning business know and they will pay the other cleaner for the extra shift.

    Employee characteristic – Catherine cannot subcontract/delegate the work.

    Ability to subcontract/delegate
    The agreement is to clean the building. It does not specify who needs to do the work. If Karl chooses, he can pay someone else to perform the work.

    Contractor characteristic – Karl can subcontract/delegate the work.

    Basis of payment
    Catherine is paid an hourly rate for the rostered shifts she works each week. The cleaning business pays her each week based on what is in her timesheets.

    Employee characteristic – Catherine is paid for the time worked.

    Basis of payment
    Karl quoted a set amount to clean the building. Payment is conditional upon the building being cleaned to the requirements of the agreement and within the specified timeframe.

    Contractor characteristic – Karl is paid for a specific result based on the quote he provided.

    Equipment, tools and other assets
    Catherine uses the cleaning equipment and products supplied by the business.

    Employee characteristic – the cleaning business provides the equipment and assets required to complete the work.

    Equipment, tools and other assets
    Karl uses his own cleaning equipment and products to complete the work.

    Contractor characteristic – Karl provides the equipment and assets required to complete the work.

    Commercial risks
    If Catherine damages anything when she is completing her work, she will need to let the cleaning business know and they will need to pay to have the damage rectified.

    Employee characteristic – Catherine takes no commercial risks.

    Commercial risks
    If Karl does not perform to the standard required or damages the office building, he can be held liable for any resulting losses.

    Contractor characteristic – Karl takes commercial risks.

    Independence
    Catherine is reliant on the cleaning business to assign her work and pay her for it.

    Catherine needs to do any work within her duty statement.

    Employee characteristic – Catherine is not operating independently of the cleaning business.

    Independence
    Karl is required to perform the services as specified in the agreement. If Karl is offered additional cleaning work on the office building not covered by the existing agreement, he can either accept or reject this work.

    Contractor characteristic – Karl is operating his own business.

    Information technology

    This example shows the differences between an employee and contractor in the information technology industry.

    Ahn is an employee

    Sara is a contractor

    A software engineer, Ahn, works for a large business. He designs, develops, tests and installs software programs.

    A software engineer, Sara, enters into a contract with a retail business to design, develop, test and install a new software program.

    Control over the work
    The business allocates work to Ahn and tells him the completion due date.

    Ahn must complete the work according to the business's established protocols, guidelines and quality standards.

    Employee characteristic – the business has control over the work.

    Control over the work
    The contract states the new software program needs to:

    • be operational within six months
    • complete specific software releases by set dates
    • meet the retail business's requirements and specifications.

    Sara is able to determine how the work is completed.

    Contractor characteristic – Sara has freedom in the way the work is done, subject to the specific terms in the contract.

    Ability to subcontract/delegate
    Ahn is required to complete tasks as assigned to him by the business. If Ahn is running late in meeting a project deadline, he may be able to assign aspects of his work to other software engineers who work for the business, depending on their workloads. The business pays the other software engineers.

    Employee characteristic – Ahn cannot subcontract/delegate the work.

    Ability to subcontract/delegate
    The contract does not stipulate Sara must personally complete the work and focuses on the result to build and install software. Sara can pay someone else to complete the work.

    Contractor characteristic – Sara can subcontract/delegate the work.

    Basis of payment
    As Ahn has recently completed his degree, the business has agreed to pay him a higher annual salary. They pay Ahn fortnightly for the agreed standard hours he works plus any agreed overtime.

    Employee characteristic – Ahn is paid for the time worked.

    Basis of payment
    Sara quoted a price to design, develop, test and install the new software program. Sara will be paid progress payments upon specific stages of the project being satisfactorily completed.

    Contractor characteristic – Sara is paid for a specific result based on the quote she provided.

    Equipment, tools and other assets
    Ahn uses the computer equipment and software provided by the business. On occasion, as agreed with the business, Ahn will work from home using his laptop to write the end-user documentation and operational procedures.

    Employee characteristic – the business provides the majority of the equipment and assets required to complete the work.

    Equipment, tools and other assets
    Sara uses her own computer equipment and software. At designated stages of the project, Sara will also use the retail business's computers for short periods of time.

    Contractor characteristic – Sara provides the majority of the equipment and assets required to complete the work.

    Commercial risks
    If there are faults in the work, or it is not completed on time, Ahn is not personally liable. The business would need to pay to correct the problem.

    Employee characteristic – Ahn takes no commercial risks.

    Commercial risks
    If the software program does not meet the retail business's agreed requirements or does not perform to specification, Sara will be required to correct the problem at her own expense.

    Contractor characteristic – Sara takes commercial risks.

    Independence
    Ahn works on an ongoing basis for the business and must do any work reasonably asked of him within his duty statement.

    Employee characteristic – Ahn is not operating independently of the business.

    Independence
    Sara has her own website which promotes her services. She has another project to do after the contract with the retail business is completed and can choose whether she undertakes future projects for the retail business.

    Contractor characteristic – Sara is operating independently of the retail business.

    Building and construction

    This example shows the differences between an employee and contractor in the building and construction industry.

    Darren is an employee

    Sam is a contractor

    A concreter, Darren, works for a local residential business. He pours concrete at new developments on behalf of the company.

    Sam has been engaged by a local business to provide concreting services to a segment of its customer base. The business chose Sam because of his industry reputation in quality of his work and repeat business in this segment of the market.

    Control over the work
    Darren is required to work at a job site from 5.30am – 3.00pm, Monday to Friday. Darren's supervisor overlooks the quality of the work and ensures the job is meeting the deadlines as per the contract.

    Employee characteristic – the business has control over the work.

    Control over the work
    Based on their agreement, Sam is not directly supervised. In line with his agreement, Sam works from home and does not have set working hours per day.

    Contractor characteristic – Sam has freedom in the way the work is done, subject to the specific terms in the agreement.

    Ability to subcontract/delegate
    Darren has been hired by the concreting business to undertake concreting work. He must personally perform the work requested of him.

    Employee characteristic – Darren cannot subcontract/delegate the work.

    Ability to subcontract/delegate
    Sam does not need to personally complete the work himself. If Sam chooses, he can pay someone else to do the work; however, he remains responsible for meeting the specific results in the agreement.

    Contractor characteristic – Sam can subcontract/delegate the work.

    Basis of payment
    Darren is paid an agreed amount for each hour he works.

    Employee characteristic – Darren is paid a price per item or activity.

    Basis of payment
    Sam will be paid the amount he quoted to provide the concreting service once he meets the specific results outlined in the agreement.

    Contractor characteristic – Sam is paid for a specific result based on the quote he provided.

    Equipment, tools and other assets
    The business provides Darren with the cement. Darren provides his own personal tools

    Employee characteristic – the business provides the majority of the equipment, tools and assets required to complete the work.

    Equipment, tools and other assets
    As specified in the agreement, Sam is required to service these customers in response to a variable level of demand and maintain a high level of quality. Although equipment is not specified in the agreement Sam provides a concrete mixer, wheelbarrow, level, shovel and other tools required. He is responsible for paying the cement service bill.

    Contractor characteristic – Sam provides the equipment, tools and assets required to complete the work.

    Commercial risks
    If a customer is unhappy with the work or the service Darren provides, they can make a complaint to the business. The business may take further action depending on the type of complaint. Darren is not personally responsible to the customer.

    Employee characteristic – Darren takes no commercial risks.

    Commercial risks
    If Sam does not achieve the results specified in his agreement, he will not be paid. He also risks the business seeking compensation from him if the business's reputation is harmed as a result of poor customer feedback.

    Contractor characteristic – Sam takes commercial risks.

    Independence
    Darren works on an ongoing basis for the business and must do any work reasonably asked of him within his duty statement.

    Employee characteristic – Darren is not operating independently of the business.

    Independence
    Sam does concrete work for a number of businesses that require knowledge of a particular service. At all times he works at job sites and is not directly supervised. At any time he can accept or refuse additional work.

    Contractor characteristic – Sam is operating his own business independently of the business that engaged him.

    See also:

    Last modified: 06 Jan 2017QC 50848