Employees vs Contractors – do you know the difference?

Many business owners and managers can be confused about whether a worker is an employee or an independent contractor. It is important to seek advice from a HR professional to help determine each worker’s role to avoid consequences such as back-pay.

A general statement of law made in a case regarding this issue said that a contractor is someone who can be fairly regarded as carrying on a business of his or her own, and the work being done happens to form part of that business. An employee, however, is the “servant” of another person in that other person’s business.

With this in mind, there are some questions which can be asked to help determine whether a worker is an employee or contractor:

 

  • Who exercises, or has the right to exercise control over who, how, where and when work is performed?

Control of this nature indicates that the worker is an employee while a lack of control indicates they are a contractor.

  • Does the worker have the right to work for third parties?

If a worker works exclusively for another person or organisation then that would indicate they are an employee, but if a person
can work for third parties, it tends to indicate a contractor.

  • Does the worker have a separate place of work from the work-giver?

A separate place of work points toward an independent contractor relationship.

  • Does the worker invoice for work?

Invoicing would indicate that the worker is a contractor.

 

These are just some of the questions that can help to determine the role of the worker but should not be considered a comprehensive or definitive method. It is important to note that every situation is different and the best way to negotiate a worker’s employee or contractor status is by seeking advice from a HR professional.

For more information and advice about employees and contractors, please contact us on (08) 9316 9896 or enquiries@processworx.com.au.

 

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