It’s important for both employers and workers to know the difference between an employee and a contractor.

Differences between employees and contractors

There are a number of areas to consider when determining whether your worker is an employee or a contractor.

Employees are usually:

• given ongoing work and hours
• paid superannuation by their employer
• entitled to minimum wages and paid regularly
• entitled to paid leave if they are permanent employees
• not responsible for financial risk (for example, supplier invoices).

Contractors are self-employed and provide a service to a business. They usually:

• negotiate how much they are paid for the work they carry out
• carry the risk of making a profit or loss
• pay their own insurance, superannuation and tax, including GST
• contract themselves to work for a set time or task and decide what hours they work
• invoice for their work or get paid at the end of the contract or project
• decide whether to employ someone else to do the work (also called a subcontractor)
• don’t get paid leave.

It’s important to consider each situation, as there is no single definition of a contractor. For example, your worker may be considered a contractor for taxation purposes, but an employee for other purposes.

Disagreements on whether you or your worker is an employee or contractor

If there is a disagreement, the courts in each state or territory can decide whether an individual is a contractor or employee.

You also need to remember that it’s illegal to fire, or threaten to fire, an employee if they don’t agree to become a contractor

If you would like to find out more of whether someone is a contractor or employee, the links below will provide you with some handy tools:

Try the Independent contractors decision tool to see if your worker is a contractor or employee based on what the courts consider when determining a hirer/worker relationship.

Use the Employee/contractor decision tool  on the Australian Taxation Office website to find out if your worker is an employee or contractor for taxation purposes.

Read the Contractors and employees – what’s the difference  fact sheet on the Fair Work Ombudsman website.

See the Independent contractors topic for more information on contractors.

Topics: Parks