Employee vs Contractor

As an employer, it is your obligation to check whether the arrangement with your worker is employment or contracting - but what’s the difference?

To work out if your worker is an employee or contractor, you need to determine whether your worker is serving in your business or is running their own business.

Here are some common indicators to determine if your worker should be an employee or a contractor:

Here are some more considerations:

• An employee must be a person - a company, partnership or trust is always a contractor.

• Some workers are always employees (ie; apprentices, trainees, labourers, and trades assistants)

• If you hired your worker through a labour hire or recruitment agency and pay that firm for the work undertaken in your business, your business has a contract with the labour hire firm.

What are my responsibilities as the business owner?

If your worker is an employee you'll need to:

• withhold tax (PAYG withholding) from their wages and report and pay the withheld amounts to us

• pay super, at least quarterly, for eligible employees

• report and pay fringe benefits tax (FBT) if you provide your employee with fringe benefits.

If your worker is a contractor:

• they generally look after their own tax obligations, so you don't have to withhold from payments to them unless they don't quote their ABN to you, or you have a voluntary agreement with them to withhold tax from their payments

• you may still have to pay super for individual contractors if the contract is principally for their labour

• you don't have FBT obligations.

Any questions?

Click the link here to read more information from the ATO.