The Fair Work Act 2009 establishes national workplace standards between an employer and an employee. The Independent Contractors Act 2006 in conjunction with the Fair Work Act 2009 protects the rights and entitlements of independent contractors.
What is the difference between an employee and an independent contractor?
There are several factors that contribute to determining the difference between an employee and an independent contractor. A court or tribunal considers the individual merits of each case (totality of the relationship) and all possible factors (the multi-factorial test) to distinguish the employment relationship as there is no single indicator.
The High Court of Australia in Hollis v Vabu Pty Ltd considered some common indicators that determine the difference between an employee and an independent contractor.
Ø Degree of control over how work is performed
An employee performs work under the direction and control of their employer, while an independent contractor has a high level of control in how their work is done.
Ø Hours of work
An employee generally works standard or set hours, with the exception of casual employees which may have varying hours from week to week. An independent contractor agrees to the number of hours required to complete a specific task.
Ø Expectation of work
An employee upholds the expectation of ongoing work, whereas an independent contractor generally only engages for a specific task.
Ø Tools and equipment
An employee uses the tools and equipment provided by the employer, while an independent contractor provides their own.
Ø Method of payment
An employee is paid regularly by the employer. For example, on a weekly, fortnightly or monthly basis. An independent contractor has obtained an ABN and submits an invoice for work completed to the principal.
Ø Leave entitlements
A full-time or part-time employee is entitled to receive paid leave, whereas independent contractors are not. Casual employees are the exception.
Ø Income tax deductions
Employees have their tax deductions withheld by their employer. Independent contractors must pay their own tax and GST to the Australian Tax Office.
Ø Superannuation contributions
Employees are entitled to have their employer pay them superannuation contributions, while an independent contractor must pay their own.
There are a number of factors that must be assessed when making this determination and the recent authority suggests that a clear separation is not an entirely simple process.
If you are an employer concerned about your structure of employees and contractors, or you are an employee who believes they are an employee but have been deemed an independent contractor, please feel free to contact Longton Legal who have experienced solicitors who can assist you understand your rights and obligations.
*Disclaimer：This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice before taking any course of action.*
Associate & Office Manager
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