Employee
A cleaning business has a contract to clean a small office building. A cleaner, Catherine, who works for the cleaning business, cleans the building. Catherine and the cleaning business have a comprehensive written contract in place governing their relationship.
Independent contractor
A cleaner, Karl, has entered into a comprehensive written contract to clean a small office building for one year.
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
Catherine
Catherine is contractually required to:
- clean the building each weeknight from 6.30 pm – 10.30 pm
- carry out the cleaning work as instructed by the business.
- do any work within her duty statement
The cleaning business is contractually entitled to do regular checks to ensure Catherine's work is meeting the required standards.
Under the contract, the cleaning business assigns work to Catherine.
Employee characteristic – the cleaning business has control over the work.
Karl
Karl has access to the building. Contractually, the cleaning work can be done at any time after office hours, from 6.00 pm until 8.00 am.
Under the contract, Karl will not be subject to direct supervision and can complete the cleaning work as he sees fit provided it meets the requirements of the agreement.
If Karl is offered additional cleaning work in the office building not covered by the existing agreement, he can either accept or reject this work.
Independent contractor characteristic – Karl has freedom in the way the work is done, subject to the specific terms in the agreement.
Integration
Catherine
Catherine undertakes a core function of the cleaning business; that is, cleaning of customers' offices. She is contractually required to wear a uniform with the business's name and logo when working.
Employee characteristic – Catherine is integrated into the cleaning business and is held out as an emanation of the business; she is not operating independently of the cleaning business.
Karl
Cleaning is not a core function of the business Karl has contracted with. When carrying out the cleaning services, Karl is not required to wear a uniform suggesting any affiliation with the business.
Independent contractor characteristic – Karl is operating his own business independent of the business which has engaged him; he is not integrated in that business.
Ability to delegate or subcontract the work
Catherine
Under the contract, if Catherine cannot do her shift, she must organise for another cleaner (who also works for the business) to fill in. Catherine needs to let the cleaning business know and they will pay the other cleaner for the extra shift.
Employee characteristic – Catherine cannot delegate or subcontract the work.
Karl
The agreement is to clean the building. It does not specify who needs to do the work. If Karl chooses, he can pay someone else to perform the work.
Independent contractor characteristic – Karl can delegate or subcontract the work.
Basis of payment
Catherine
Under the contract, Catherine is paid an hourly rate for the rostered shifts she works each week. The cleaning business pays her each week based on what is in her timesheets.
Employee characteristic – Catherine is paid for the time worked.
Karl
Karl quoted a set amount to clean the building. Payment is contractually conditional upon the building being cleaned to the requirements of the agreement and within the specified timeframe.
Independent contractor characteristic – Karl is paid for a specific result based on the quote he provided.
Equipment, tools and other assets
Catherine
Catherine uses the cleaning equipment and products which the cleaning business is contractually required to supply.
Employee characteristic – the cleaning business provides the equipment and assets required to complete the work.
Karl
Karl uses his own cleaning equipment and products to complete the work, as required under the contract
Independent contractor characteristic – Karl provides the equipment and assets required to complete the work.
Commercial risks
Catherine
If Catherine damages anything when she is completing her work, she is contractually required to let the cleaning business know and it will pay to have the damage rectified.
Employee characteristic – Catherine takes no commercial risks.
Karl
If Karl does not perform to the standard required or damages the office building under the contract, he can be held liable for any resulting losses.
Independent contractor characteristic – Karl takes commercial risks.