As a contractor, you’re running your own business. This means you will need to apply for an ABN, put money aside for your own tax and contribute super unless you are contracted mainly for your own labour. Running your own business means you are required to keep records and complete forms (such as activity statements) for the ATO.
As an employee, you’re working in another person’s business. That business withholds tax from your pay and usually has an obligation to help provide for your retirement by making super guarantee payments on your behalf.
What happens if you find yourself in a situation where, you think the job you have been offered is contracting but looks more like employment or you’re a contractor, but the job has changed and you now think it might be employment?
The table below shows you the differences between contractors and employees.
Contractors and employees: the differences
Situation
If you’re a contractor
If you’re an employee
Ability to sub-contract or delegate– who does the work?
You’re free to pay someone else to do the work instead of you.
You can’t pay someone else to do the work.
Basis of payment– how does the person who pays you work out how much to pay you?
You’re paid all or the majority of the amount of your quote once you finish the work (to an agreed standard).You will generally supply an invoice to the other business before they pay you.
You’re paid either:
for the amount of time (normally hours or shifts) you worked
a price for each item or for each activity you do
a commission.
Equipment, tools and other assets– what you need to do your work?
You bring to the job all or most of the things you need to do your work.You have to buy or hire your tools of trade or any equipment you need to do the work.
The business you work for gives you all or most of the things you need to do your work.orYou provide all or most of the things you need to do your work but the business you work for gives you an allowance or pays you back for the cost of the things you have bought.
Commercial risks– if you make a mistake, who pays to have it fixed?
You’re responsible for fixing your own mistakes at your own expense.
The business you work for is responsible if you make a mistake. They pay for the cost of fixing it.
Control over the work– who tells you how to do the work?
You can do the work in any way you like as long as the work is completed to an agreed standard, or to the specific terms in your contract or agreement.
You follow any reasonable work requests your supervisor or the business you work for makes.
Independence– are you seen to be a part of the business or separate?
You’re operating your own business independently. You complete the tasks or services as agreed to in your contract or agreement and are free to accept or refuse extra work.
You’re seen to be part of the business and are not independent from it.
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