• Difference between employees and contractors

    The following table explains the difference between an employee and a contractor.

    Employee or contractor

    Employee

    Contractor

    An employee works in your business and is part of your business.

    Characteristics of an employee include the following:

    A contractor is running their own business and provides services to your business.

    Characteristics of a contractor include the following:

    Ability to sub-contract/delegate: the worker cannot sub-contract/delegate the work - they cannot pay someone else to do the work.

    Ability to sub-contract/delegate: the worker is free to sub-contract/delegate the work - they can pay someone else to do the work.

    Basis of payment: the worker is paid:

    • for the time worked
    • a price per item or activity
    • a commission.

     

    Basis of payment: the worker is paid for a result achieved based on the quote they provided.

    Equipment, tools and other assets:

    • your business provides all or most of the equipment, tools and other assets required to complete the work, or
    • the worker provides all or most of the equipment, tools and other assets required to complete the work, but your business provides them with an allowance or reimburses them for the cost of the equipment, tools and other assets

     

    Equipment, tools and other assets: the worker provides all or most of the equipment, tools and other assets required to complete the work. The worker does not receive an allowance or reimbursement for the cost of this equipment, tools and other assets.

    Commercial risks: the worker takes no commercial risks. Your business is legally responsible for the work performed by the worker and liable for the cost of rectifying any defect in the work.

    Commercial risks: the worker takes commercial risks, with the worker being legally responsible for their work and liable for the cost of rectifying any defect in their work.

    Control over work: your business has the right to direct the way in which the worker performs their work.

    Control over work: the worker has freedom in the way the work is done subject to the specific terms in any contract or agreement.

    Independence: the worker is not operating independently from your business. They work within and are considered part of your business.

    Independence: the worker is operating their own business independently from your business. The worker performs services as specified in their contract or agreement and is free to accept or refuse additional work.

    Workers who are employees

    Some types of workers in the building and construction industry are always employees.

    Labourers

    A labourer is a worker who is paid to provide their labour and little else. They may be skilled, unskilled or semi-skilled.

    A labourer:

    • is usually paid at an hourly rate or day rate, but on occasion may be paid at 'piece-work' rates
    • works under the control, direction or supervision of another person within the business
    • is not required to provide materials and equipment, but they may provide less costly hand tools.

    Labourers are often used to complete:

    • formwork
    • scaffolding
    • concreting
    • installation of pre-fabricated materials.

    Trades assistants

    A trades assistant is an industry term used to describe an unqualified, unskilled or semi-skilled worker who helps a contractor or a business (or an employee of the business) do their work.

    Trades assistants:

    • are sometimes also referred to as 'labourers'
    • are usually paid at an hourly rate or day rate
    • work under the control, direction or supervision of another person.

    Trades assistants are not required to provide materials and equipment. However, they may provide less costly hand tools for their work. The main activity or service these workers provide is their labour.

    Apprentices and trainees

    Apprentices and trainees:

    • do a combination of work and recognised training to get a qualification, certificate or diploma
    • have a formal training agreement with the business they work for which is registered through a state or territory training authority or completed under a relevant law
    • can be full-time, part-time or school-based.

    Apprentices and trainees are in training and are required to work under the direction, control and supervision of their employer to earn their qualification, certificate or diploma.

      Last modified: 13 Apr 2016QC 18176