Employee or Contractor? Know the Difference

Employee or Contractor? Getting it Wrong Can Be Costly.

Hiring someone? It’s critical to get the classification right. The line between an employee and an independent contractor isn’t always clear and getting it wrong can expose your business to unforeseen problems with respect to tax, superannuation and/or fair work claims.

A few key points:

• Superannuation may still apply to contractors, even if they’re genuinely independent.
• Discrimination and safety obligations apply to both employees and contractors.
• Worker’s compensation laws may deem some contractors as “workers” even if you didn’t intend to employ them.

You can’t contract your way out of statutory obligations. It’s about how the relationship functions in practice.

I’ve prepared a quick guide to help business owners get this right from the start before the ATO or Fair Work comes knocking. If you need in-depth information the Tax Office ruling TR 2023/24 on PAYG tax now also provides guidance on when someone is considered an employee and takes into account recent case law so is right up to date on the issue. A copy of the ruling can be found on the Tax Office website.

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