Employee or contractor?

It is important to know the differences between an employee and a contractor (also called an independent contractor or sub-contractor) as this will affect your responsibilities, such as paying superannuation contributions.

A worker isn’t automatically a contractor just because they have specialist skills or you only need them during a busy time. You need to consider the whole working arrangement. The easiest way to determine someone’s status is to use the Australian Tax Office’s (ATO) employee/contractor decision tool.

TIP: Providing you give accurate responses you can rely on the tool’s results and will not be penalised if a future review by the ATO shows that you have not met your pay as you go obligations. Make sure you keep a copy of the results for your records.

In simple terms, employees work in your business and are part of your business, while contractors run their own business and provide services to your business. Other differences are outlined below:



You are in control of the work they perform

In control of when and how they work

Are recognised as part of your business and usually work on a regular and ongoing basis

Can accept and perform work for other people while engaged by your business

Paid according to relevant award or contract of employment

Paid based on invoices and results achieved

Supplied with your materials and equipment to undertake work

Supply their own materials and equipment to undertake work

You pay their tax, superannuation and workers’ compensation

Responsible for their own tax and superannuation

Represent your business

Represent their own business

TIP: A worker with an ABN is not automatically a contractor.

Contractors may also be entitled to workers' compensation if they meet the criteria of a worker as defined in the  Workers' Compensation and Injury Management Act 1981.

TIP: Just because a person is described as self-employed or has an ABN may not exempt you from any liability for work-related injuries. 

More information