Employee or contractor - what's the difference

Common things to check

There are 6 key things to check to help you work out if you're a contractor or employee.

1. Ability to sub-contract or delegate
   Who does the work?
2. Basis of payment
   How does the person who pays you work out how much to pay you?
3. Equipment, tools and other assets
   What you need to do your work?
4. Commercial risks
   If you make a mistake, who pays to have it fixed?
5. Control over the work
   Who tells you how to do the work?
6. Independence
   Are you seen to be a part of the business or separate?

If you are working as an apprentice, labourer or trainee you will always be an employee for tax and super purposes.

You also need to know as either an employee or contractor the different tax and super obligations you need to meet.

These common myths about being a contractor will help you work out your work type and position.

We tell you what to do if you think you're an employee.

Employees

As an employee, you:

• can't pay someone else to do the work
• receive payments    
  • for the amount of time (normally hours or shifts) you work
  • for each item or for each activity you do
  • as commission
   
• use tools, equipment or other assets that either    
  • your employer (work) gives you to do your work
  • you provide to do your work, but the business you work for gives you an allowance or pays you back for the cost of the items
   
• don't personally pay for mistakes, the business you work for is responsible if you make a mistake and they pay for the cost of fixing it
• follow any reasonable work requests your supervisor or the business you work for makes
• are seen to be part of the business and are not independent from it.

Contractors

As a contractor, you:

• can pay someone else to do the work instead of you
• receive all or the majority of the amount of your quote once you finish the work (to an agreed standard)
• supply an invoice to the other business before they pay you
• bring to the job all or most of the things (tools and equipment) you need to do your work
• have to buy or hire your tools of trade or any equipment you need to do the work
• are responsible for fixing your own mistakes at your own expense
• can do the work in any way you like as long as you complete the work to an agreed standard, or to the specific terms in your contract or agreement
• are operating your own business independently – meaning you complete the tasks or services as agreed to in your contract or agreement and are free to accept or refuse extra work.

Find out the main differences between working as an employee or contractor and how you should be receiving your income.