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Contractor or Employee?

Important checks for employers when hiring a contractor

There’s not just one deciding factor that makes a worker you hire an employee or contractor for tax and superannuation purposes. As an employer, it’s a decision you can only make once you’ve reviewed the entire working arrangement.

It’s important to assess this correctly because getting it wrong will put your business at risk of penalties and charges. Failing to pay your workers their correct entitlements is a costly mistake.

To get to the right answer, you need to consider a number of factors. Before hiring a contractor review the following case scenarios:

  • ability to subcontract or delegate – if they pay someone else to do the work
  • basis of payment – if they will be paid based on an agreed quote they provided
  • equipment, tools and other assets – if they are providing their own tools and equipment needed to get the job done
  • commercial risks – if they are legally responsible for their work and liable for fixing mistakes or defects
  • control over the work – if they decide how the work gets done subject to specific terms in any contract or agreement
  • independence – if they operate their own business independently of your business.

If the answer is no to some or all of these scenarios, you need to seek further information and advice before treating your worker as a contractor.

Employee/Contractor decision tool:

https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=ECDTSGET&anchor=ECDTSGET#ECDTSGET

 

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