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HT for Small Biz - Newsletter

Frequently asked questions: Employee or Contractor?

Determining whether an individual is an employee or contractor can be quite difficult. It is important to know whether you are engaging someone as an employee or an independent contractor so you can be sure you are paying the right entitlements. There are several questions that aim to provide a criteria for classifying employees vs contractors in your business.

Determining whether an individual is an employee or contractor can be quite difficult. It is important to know whether you are engaging someone as an employee or an independent contractor so you can be sure you are paying the right entitlements. There are several questions that aim to provide a criteria for classifying employees vs contractors in your business.

Some questions that help establish the difference between an employee and a contractor are included here;

Question

Employee

Contractor

Control: Does the individual decide how they are to perform their work and what skills are needed

No

Yes

Risk: The individual carry’s the risk of making a profit or loss

No

Yes

Equipment: The individual provides their own tools and equipment

No

Yes

Payment: The individual is paid regularly via payroll

Yes

No

Assignment: The individual is able to employ someone else to do the work or not

No

Yes

Taxation: The individual has income tax taken out of their pay

Yes

No

Superannuation:  The individual pays their own superannuation

No

Yes

Invoices: The individual gives an invoice for their work

No

Yes

Entitlements: The individual accrues and gets paid leave entitlements

Yes

No

Insurances: The individual provides workers compensation, public liability, professional indemnity insurance

No

Yes

These are a few of the several criterion used to help differentiate between an employee and a contractor, and are a general guide only. There is not one particular element that makes the difference on its own, with each case being different. Establishing a large majority of “yes” responses to questions like the ones above will ensure your decision is made with more accuracy.

Feel free to contact us on (02) 8882 9694 if you require any assistance with determining an individual’s classification.

 Suite 4.05, 5 Celebration Drive
 Bella Vista NSW 2153

Ph: 02 8882 9694 M: 0415 225 920 
www.hrforsmallbiz.com.au 

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