When hiring workers, do you understand the difference between contractors and employees for tax and super purposes?
Getting it wrong compromises your business’ ability to meet tax and super obligations, and can mean your workers miss out on employee entitlements.
If you misclassify your workers you can also be caught out with penalties and charges.
There is no one deciding factor that makes a worker an employee or contractor.
To help classify your workers, you must consider the whole working arrangement, including questioning each worker’s:
- ability to subcontract/delegate: can the worker pay someone else to do the work?
- basis of payment: is the worker paid based on an agreed quote they provided?
- equipment, tools and other assets: does the worker provide their own tools and equipment needed to do the job?
- commercial risks: is the worker legally responsible for their work and liable for fixing mistakes or defects?
- control over the work: does the worker decide how to do the work, subject to specific terms in the contract or agreement?
- independence: does the worker operate their own business independently of your business?
If your answers are ‘no’ to some or all of these questions, seek further information and advice before hiring, or continuing to treat your workers as contractors.
Remember, if you are taking on an apprentice, trainee, labourer or trades assistant, those workers are always employees, never contractors.