Employee
A concreter, Darren, works for a local residential building business. He pours concrete at new housing developments on behalf of the company. Darren and the business have a comprehensive written contract in place governing their relationship.
Independent contractor
Sam has been engaged under a comprehensive written contract, by a local business to provide concreting services to a segment of its customer base. The business chose Sam because of his industry reputation in quality of his work and repeat business in this segment of the market.
See the differences in their worker characteristics:
- Control over the work
- Integration
- Ability to delegate or subcontract the work
- Basis of payment
- Equipment, tools and other assets
- Commercial risks
Control over the work
Darren
Darren is contractually required to:
- work at a job site from 5.30 am – 3.00 pm, Monday to Friday, and
- do any work reasonably asked of him within his duty statement.
Under the contract, Darren's supervisor has the right to oversee the quality of his work and ensure Darren is meeting his deadlines.
Employee characteristic – the business has control over the work.
Sam
Based on the contract, Sam is not directly supervised and he does not have set working hours per day.
At any time, he can accept or refuse additional work.
Independent contractor characteristic – Sam has freedom in the way the work is done, subject to the specific terms in the agreement.
Integration
Darren
Darren undertakes a core function of the business – pouring concrete – which is essential to home construction.
Employee characteristic – Darren is integrated into the business; he is not operating independently of the business.
Sam
Concreting services are not a core function of the business which has engaged Sam, being that of a labour-hire firm.
Sam does concrete work for a number of businesses that require knowledge of a particular service.
Independent contractor characteristic – Sam is operating his own business independently of the business which has engaged him, he is not integrated in that business.
Ability to delegate or subcontract the work
Darren
Darren has been hired by the concreting business to undertake concreting work. Under the contract, he must personally perform the work requested of him.
Employee characteristic – Darren cannot delegate or subcontract the work.
Sam
Sam does not need to personally complete the work himself. If Sam chooses, he can, pursuant to the contract, pay someone else to do the work; however, he remains responsible for meeting the specific results in the agreement.
Independent contractor characteristic – Sam can delegate or subcontract the work.
Basis of payment
Darren
Darren is contractually paid an agreed amount for each hour he works.
Employee characteristic – Darren is paid a price per item or activity.
Sam
Sam will be paid the amount he quoted to provide the concreting service once he meets the specific results outlined in the agreement.
Independent contractor characteristic – Sam is paid for a specific result based on the quote he provided.
Equipment, tools and other assets
Darren
The business is contractually required to and does provide Darren with the concrete. Under the contract, Darren must provide his own tools to undertake the work.
Employee characteristic – the business provides the majority of the equipment, tools and assets required to complete the work.
Sam
As specified in the contract, Sam is required to service these customers in response to a variable level of demand and maintain a high level of quality. Although equipment is not specified in the agreement, Sam provides a:
- concrete mixer
- wheelbarrow
- level
- shovel
- other tools required.
He is responsible for paying the concrete service bill.
Independent contractor characteristic – Sam provides the equipment, tools and assets required to complete the work.
Commercial risks
Darren
If a customer is unhappy with the work or the service Darren provides, they can make a complaint to the business. The business may take further action depending on the type of complaint. Darren is not personally responsible to the customer under the contract.
Employee characteristic – Darren takes no commercial risks.
Sam
If Sam does not achieve the results specified in his contract, he will not be paid. He also risks the business seeking compensation from him if the business's reputation is harmed as a result of poor customer feedback.
Independent contractor characteristic – Sam takes commercial risks.