Contractor or Employee

From 26 August, 2024 new definitions of employee and employment have been introduced into the Fair Work Act. The test that will be used looks very much like the old multifactor test and how the work of the person evolves, rather than what the written contract may say.

If there is a dispute as to whether a worker is an employee or a contractor, a court or tribunal will look at:

• Does the worker operate their own business? If not, the had to say they are working as a part of their own business.

• Employees are usually paid based upon their hours of work, be it full-time, part-time or casual. Taxes are deducted by the employer. A contractor on the other hand will provide an invoice and pay their own taxes.

• Employees work for their employer and cannot work for anyone else without their employer’s consent. On the other hand, contractors are able to work for a number of different businesses, and will have this set out in their written contract.

• An employer can control how, when and where their employees work. Contractors can control their own work methods, and can also have others perform their work for them.

• Employers will provide the tools of trade and equipment for their employees whereas a contractor will be usually be required to provide their own tools, plant and equipment.

• Employees are entitled to paid leave, such as annual and sick leave, whereas contractors are not.

Just because someone advises they have an ABN and offers to provide an invoice, does not make them a contractor. There are too many examples of these questionable arrangements, and you do not want to face the possible legal consequences of misclassifying an employee.

If you need assistance with determining to whom the new definition of employment applies, classifying your workforce, or offering new contracts of employment, please contact Primary Employers Tasmania.