It is important to identify whether you are an employee or a contractor, because this affects your tax, super and other obligations.
So, what is the difference between employee and contractor?
If you don’t have your own business and work for other business, you are an employee. If you are operating your own business independently, and perform services as specified in the contract, then you are a contractor, but not an employee. As an employee, you can’t pay someone else to subcontract your work, you are paid either for the work hours; a price per item or activity or a commission, but for a contractor, you are paid based on the quote they provided and you can also delegate the work and pay someone else to do the work.
What if you get it wrong?
The employment relationship is more heavily regulated than a contractor relationship. If you incorrectly classify an individual as a contractor whereas the fact is that they are employees, or you classify an individual as an employee whereas they are contractors, you will at the risk of breaching the law. You may be liable for superannuation charges; additional payroll tax and back pay under a modern award; unpaid annual and long service leave; compensation for unfair dismissal or for other prohibited conduct.
So how can you correctly classify an individual as an employee or a contractor? And how can you avoid unnecessary charges and compensation?
If you need any help, please contact us.