Employee or independent contractor - what's the difference

Check if you’re an employee or independent contractor

There are 6 key things to check to help you work out if you're an independent contractor or employee.

1. Ability to delegate or sub-contract the work
   Who can do the work?
2. Basis of payment
   How is your payment calculated?
3. Equipment, tools and other assets
   What do you need to do your work and who provides such items?
4. Commercial risks
   If you make a mistake, who pays to have it fixed?
5. Control over the work
   Who has the right to tell you how, when, and where you do your work?
6. Integration
   Are you seen to be a part of the business or separate?

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

You need to know as an employee or contractor the different tax and super obligations you need to meet.

These common myths about being an independent contractor will help you work out your work type and classification.

We tell you what to do if you think you're an employee.

Employees

As an employee, you:

• can't pay someone else to do the work you are contracted to perform, meaning you cannot delegate or subcontract your work to someone else
• receive payments      
  • for the time (normally hours or shifts) you work
  • for each item or for each activity you do
  • on a commission basis
• usually have work hours set by an agreement or award
• use tools, equipment or other assets that either      
  • your employer (engaging business) gives you to do your work
  • you provide to do your work, but the business you work for gives you an allowance or pays you back for the cost of the items
• receive paid leave – for example, sick, annual, recreation or long service leave
• don't personally pay for mistakes you make performing your work, 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.

Independent contractors

As an independent contractor, you:

• can delegate or subcontract the work you are engaged to perform to another person and are responsible for paying that person for the work they undertake on your behalf
• receive all or the majority of the amount of your quote once you finish the work (to an agreed standard)
• supply an invoice to the engaging business before they pay you
• bring to the job all or most of the things (tools, equipment and materials) you need to do your work
• have to buy or hire your tools of trade or any equipment you need to do the work at your own expense
• do not receive paid leave – for example, sick, annual, recreation or long service leave
• 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
• could be 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.