Employee
A truck driver, Ralph, works for a food manufacturing business and transports its products long distances to retail outlets across Australia. Ralph and the food manufacturing business have a comprehensive written contract in place governing their relationship.
Independent contractor
A truck driver, Toni, who leases a refrigerated truck, enters into a contract with a local seafood business to transport its products during the busy Christmas period.
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
Ralph
The food manufacturing business contractually requires Ralph to:
- make deliveries according to its monthly schedule and procedures
- complete and submit a logbook documenting his driving hours and kilometres travelled
- do any work which is reasonably asked of him
- not use the truck to do other work
Employee characteristic – the food manufacturing business has control over the work.
Toni
The seafood business's products must be delivered for the period 1 November to 24 December in a specified delivery region.
Provided the deliveries are made on the required day, Toni can determine how and in what order the deliveries are made.
Toni can undertake work for others during the period 1 November to 24 December.
Toni can accept or refuse additional work from the business.
Independent contractor characteristic – Toni has freedom in the way the work is done, subject to the terms in the contract.
Integration
Ralph
Ralph undertakes an ancillary function of the food manufacturing business, being the transport of the food rather than a core function. However, he is contractually required to wear a uniform with the business's name and logo when working. The truck Ralph drives to transport the food is also emblazoned with the business's name and logo.
Employee characteristic – Ralph is integrated into the food manufacturing business and is held out as an emanation of the business; he is not operating independently of the food manufacturing business.
Toni
Toni is undertaking an ancillary function of the seafood business, not as core function. Further, she is not contractually required to wear a uniform while undertaking deliveries for the business. Nor is the truck she is using required to carry any identifying marks of the seafood business.
Independent contractor characteristic – Toni is operating her own business independently of the seafood business.
Ability to delegate or subcontract the work
Ralph
Ralph is required to undertake the deliveries himself. If Ralph is unavailable, he needs to let the food manufacturing business know so it can organise and pay a replacement truck driver.
Employee characteristic – Ralph cannot delegate or subcontract the work.
Toni
The contract does not stipulate that Toni must personally make the deliveries. She can organise for another suitably-licensed truck driver to make the deliveries but is responsible for paying the other truck driver.
Independent contractor characteristic – Toni can delegate or subcontract the work.
Basis of payment
Ralph
Ralph is contractually paid:
- an agreed amount per kilometre he drives
- for the number of kilometres he has travelled each month.
Employee characteristic – Ralph is paid a price per item or activity.
Toni
Toni is contractually paid to transport the business's products during 1 November to 24 December, and will receive an agreed amount per delivery made as per the contract and initial quote. She will issue an invoice and receive payment from the seafood business.
Independent contractor characteristic – in the context of the contract, when considered as a whole, between Toni and the seafood business, she is paid for a specific result based on the quote she provided.
Equipment, tools and other assets
Ralph
The food manufacturing business is contractually required to provide Ralph with a refrigerated truck for his delivery schedule (it may be a different truck each time).
Under the contract, Ralph is required to use the food manufacturing business's fuel card to purchase fuel at participating fuel stops along the route as required.
Employee characteristic – the food manufacturing business provides the assets required to complete the work.
Toni
Toni will use the refrigerated truck she leases to make the deliveries.
Toni purchases fuel with her own money from any outlet she chooses. She is not contractually reimbursed for the petrol used.
Independent contractor characteristic – Toni provides the assets required to complete the work.
Commercial risks
Ralph
If the refrigeration in the truck breaks down, the food manufacturing business is contractually responsible for the cost of any spoilt stock. The business has taken out the relevant insurance.
Employee characteristic – Ralph takes no commercial risks.
Toni
If the refrigeration in the truck breaks down, Toni is contractually responsible for the cost of any spoilt stock. Toni has taken out the relevant insurance.
Independent contractor characteristic – Toni takes commercial risks.