As an employer, it's important that you understand the difference between employees and contractors. Employing someone under the wrong arrangement could put your business at risk of penalties. Things like your tax and super obligations are also affected by your workers’ arrangement.

2016-09-AU - Employee or Contractor

Ultimately, you’re responsible for getting it right, so check out the myths we’ve busted below, or head to the end of the article for the tool that can help you!

Five common employee or contractor myths busted!

Myth #1 – People who do short-term work are automatically a contractor

Just because you’re hiring someone for a few hours or a couple of days at a time, doesn’t mean they’re automatically a contractor.

Both employees and contractors can be hired for:

  • casual, temporary, on call and infrequent work
  • busy periods
  • short jobs, specific tasks and projects.

Myth #2 – Workers with an ABN are always contractors.

Think that workers with ABNs are always contractors? That’s not always the case!

If the working arrangement is employment, whether the worker has, or quotes, an ABN is not the deciding factor of whether or not a worker is a contractor.

Myth #3 – Because you’ve been invoiced for work performed it means the person is a contractor.

Just because you’re invoiced for the work that was provided, doesn’t necessarily mean that the person is a contractor!

Receiving an invoice from a worker is not the deciding factor—as a business owner, you need to consider the whole working arrangement so you’re clear on your tax and super.

Myth #4 – The majority of people in your industry are contractors, which means your workers should be too.

So you’ve hired a worker and assumed they’ll work under a contracting arrangement because that’s how workers are usually treated in your industry.

Don’t just rely on how other people are doing things! Make it your business to consider the terms and conditions of each individual’s working arrangement. This way, you can be clear on your tax and super responsibilities and be sure you’re getting it right.

Myth #5 – It says that your worker is a contractor in a written agreement, so they must be one.

Just because it states in a written agreement that your worker is a contractor, doesn’t mean that they are—nor does it protect you from potential penalties for getting it wrong!

If your worker is legally an employee, having a written agreement will not:

  • override the employment relationship or make the worker a contractor, or
  • remove your tax and super obligations.

You need to look at each working arrangement individually so you can understand your tax and super responsibilities, and avoid penalties for your business.