• Road transport example

    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
    • take specific rest and sleep breaks in accordance with Australian regulations
    • 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 whatever outlet she wants to use.

    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.

    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.

    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.

    See also:

    Last modified: 22 Feb 2016QC 33194