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  • Employee or contractor - what's the difference

    Find out the main differences between working as an employee and working as a contractor. These will help you work out how you should be receiving your income.

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

    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?

    Employees

    • can't pay someone else to do the work
    • are paid either
      • for the amount of time (normally hours or shifts) you worked
      • a price for each item or for each activity you do
      • a commission
    • either
      • have your employer (work) provide you with all or most of the things (tools and equipment) you need to do your work
      • provide all or most of the things you need 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

    • can pay someone else to do the work instead of you
    • are paid 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.

    See also:

    Last modified: 25 May 2021QC 43437