Ahn is an employee
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Sara is a contractor
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A software engineer, Ahn, works for a large business. He designs, develops, tests and installs software programs.
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A software engineer, Sara, enters into a contract with a retail business to design, develop, test and install a new software program.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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