Are you an independent contractor and unsure of your rights and obligations? The FairWork Ombudsman offers comprehensive advice and support to help you understand laws, payment rights and entitlements for independent contractors.
Independent contractors provide agreed services under a contract for those services. They usually negotiate their own fees and working arrangements and can work for more than one client at a time. Independent contractors are often called contractors or subcontractors.
Whether a worker is a contractor or an employee is determined by the nature of the relationship, not what the arrangement is called.
The difference between contractors and employees
According to the FairWork Ombudsman, independent contractors have different rights and obligations to employees. This is because they provide services to another person or business, as opposed to being employed by that person or business. This means it’s important to understand the difference between the two.
As a rule, for an employment relationship to exist, a minimum level of mutual obligation is required. In other words, there is an obligation for one person to perform work (the employee) and for the other person to pay for that work (the employer). Courts look at the whole relationship between the parties when determining if a person is an employee or an independent contractor.
Below are some of the common indicators and general examples that, when considered together, can help tell the difference between an employee and an independent contractor.
You need to consider all these indicators when working out whether you’re an employee or an independent contractor. There usually won’t be one deciding indicator. For example, just because you have an ABN or issue invoices doesn’t automatically make you an independent contractor.
A person won’t automatically be an employee or an independent contractor because of the type of work they do. A person may perform the same type of work as an employee of a business but may still be an independent contractor. This means that whether someone is an employee or an independent contractor will depend on the individual circumstances.
Learn more about the differences between contractors and employees here.
Getting paid as an independent contractor
Since independent contractors aren’t employees, they don’t have a minimum wage or pay rate. Instead, independent contractors usually negotiate payment as part of their contract for the services they provide.
An independent contractor will submit an invoice when they need to be paid. They can be paid regularly or at the end of the contract or project.
If an independent contractor doesn’t get paid for an invoice, they can take their own legal action or seek independent legal advice. We can’t enforce payment of unpaid invoices.
Tax and super
Since independent contractors provide services to another person, they need to pay their own income tax on the money they earn (to comply with tax laws) and may need to pay GST. For more information on tax visit the Australian Taxation Office.
As well as paying their own tax, independent contractors may need to make their own superannuation contributions. There are exceptions to this, such as when a contractor is hired wholly or principally for labour. In this case, the person that hired them is responsible for paying their superannuation. For more information on when superannuation is paid by the contractor or the hirer visit the Australian Taxation Office.
Independent contractors don’t get other entitlements that employees get such as leave and notice of termination unless they negotiate for these entitlements to be included in their contract.
Independent contracting laws
The Fair Work Act 2009 protects independent contractors from adverse action, coercion and abuses of freedom of association. See Protections at work for more information.
The Independent Contractors Act 2006 sets up a national unfair contracts remedy scheme for independent contractors where they can ask a court to set aside a contract if it is harsh or unfair.