Contractor or Employee?

RHGIf you are beginning a new job, you should ensure that your relationship with the business hiring you is clearly defined.

If you work for a business under a contract of employment in return for regular pay, you will generally be classified as an “employee”. Employees are provided with the safety net of minimum terms and conditions of employment under the National Employment Standard (NES), which include annual & personal leave, parental leave, a right to request flexible working arrangements, a standard working week of 38 hours, public holiday entitlements and notice of termination.

Independent contractors, on the other hand, are generally not entitled to the benefits under the NES. “Contractors” are usually engaged under a contract to perform a specific task or are contracted for a specific period. A contractor will normally supply & use their own equipment, and will have control over the hours they work.

Whilst most agreements will state whether the relationship is that of “employer/employee” or “principal/contractor”, some employers may attempt to conceal the true nature of the arrangement in an attempt to avoid paying superannuation and leave entitlements.

The following factors are taken into consideration in determining whether a person falls into the “employee” or “contractor” category:

  • the degree of control the “employer” exercises over the place of work, hours of work and the manner in which work is performed.
  • whether the worker is at liberty to advertise their services to others.
  • deduction of income tax from remuneration paid to the worker.
  • whether the worker provides significant tools or equipment.
  • method of remuneration – periodic wage/salary vs. payment on completion of specific tasks.
  • provision of paid holiday or sick leave.
  • whether the worker spends a significant proportion of his/her remuneration on business expenses.

If you are currently operating as a “contractor” however think that you should be entitled to the benefits of an “employee” classification, contact the employment law team at Everingham Solomons where Helping You is Our Business.

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