Who are contractors?
Contractors run their own business and sell their services to other people and businesses, unlike employees who work for someone else’s business.
Contractors generally use their own tools and processes to complete their work, and are hired to do a set job or jobs based on the terms of a contract.
They sometimes work for a number of clients at once and can sub-contract work if they need to.
Importantly, contractors have different workplace rights and protections to employees.
They also have different responsibilities relating to workplace safety, taxation, insurance and superannuation.
The difference between an employee and a contractor
According to the Fair Work Ombudsman, the difference between an employee and independent contractor is based on many different factors.
No single factor determines whether a person is an employee or contractor.
Instead, courts will look at each case and make a decision based on the totality of the relationship between the parties when determining the status of a person’s employment.
There are some common factors that may contribute to determining whether a person is an employee or independent contractor.
A contractor will normally:
- have a high level of control in how the work is done
- decide what hours to work to complete the specific job
- bears the risk for making a profit or loss on each job
- bears responsibility and liability for poor work or injury sustained while performing a job
- have their own insurance policy
- pays their own superannuation
- uses their own tools and equipment
- pay their own tax and GST to the Australian Taxation Office
- obtained an ABN and submits an invoice for work completed or is paid at the end of the contract or job
- does not receive paid leave
Sham contracting
Sham contracting happens when an employer deliberately mis-classifies a worker as an independent contractor when they are really an employee.
They do this to avoid paying proper wages and entitlements like sick leave and annual leave and superannuation.
Sometimes employers will terminate an employee and re-hire them immediately as an independent contractor.
Sham contracting is unlawful.
If this has happened to you, you need to seek urgent expert legal advice from a workplace relations specialist like Industrial Relations Claims.
How we can help
If you are a contractor, we can help you understand the different laws affecting contracts, and ensure that your business is compliant with workplace laws, and that you know your rights and responsibilities as a contractor.
If you have been a victim of sham contracting, we can take legal action to recover any unpaid wages or entitlements.
Franchising engagements advice
The relationship between franchisors and franchisees has often been termed a “commercial marriage”, and can be fraught with many traps and pitfalls, which unfortunately can end with all sorts of claims and disputes.
Whether you’re buying or selling a franchise, we can help – from reviewing or drafting franchise documents, to resolving disputes.
Our areas of expertise include:
- Marketing for franchisees
- Presentation of the franchise offer
- Negotiation with the franchisee’s legal advisors
- Managing the sale of a franchisee’s business and assignment of franchise to the purchaser
- Dispute resolution including negotiation, mediation and litigation
- Dealing with poor performing or problem franchisees
- Renewal
- Termination
We can help you understand your rights and obligations whether you are a franchisor or franchisee to help you maximise your business potential.
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LAST UPDATED: May 2022
