Contractor or Employee 

What Business Owners Need to Know in 2026

Should a worker be treated as a contractor or an employee?

This decision affects payroll, superannuation, tax, workers compensation and compliance. It is your responsibility as a business owner to classify each worker correctly.

In 2026, worker classification remains a focus area for the ATO and Fair Work Ombudsman. Getting it wrong can lead to back payments, penalties and unnecessary disruption to your business.

What is an employee?

An employee:

• Works in your business and forms part of your operations
• Has rights and entitlements under the Fair Work Act 2009
• Has agreed duties and usually an expectation of ongoing work
• Is covered by your workers compensation insurance
• Must be paid superannuation guarantee
• Is processed through payroll with PAYG withholding and Single Touch Payroll reporting

What is a contractor?

A contractor:

• Operates their own business and usually advertises their services
• Provides an ABN and invoices for work performed
• Is responsible for their own insurance, equipment, licences and tax
• Has independence and control over how and when work is performed
• Can usually delegate work within their own business
• May or may not be entitled to super, depending on the engagement

Understanding the multi-factor test

There is no single rule that determines whether someone is an employee or contractor.

Courts apply a multi-factor test. This means the entire working relationship is examined. No one factor is decisive.

Recent court decisions have placed greater emphasis on the written contract where it clearly reflects the working arrangement. However, if the day-to-day reality does not match the contract, that will still be considered.

Each relationship must be assessed individually.

Engaging sole traders requires extra care

Having an ABN does not automatically make someone a contractor.

Many sole traders are engaged mainly for their personal labour. If they cannot delegate work, operate under your direction, are integrated into your business and do not genuinely run an independent enterprise, they may meet the definition of an employee.

The ATO and Fair Work Ombudsman continue to monitor these arrangements closely.

Key factors to assess

When determining whether a worker is a contractor or employee, consider:

• Is the worker engaged to produce a specific result or primarily for their labour?
• Can they delegate or subcontract the work?
• How much control do you exercise over how, when and where the work is performed?
• Is the role integral to your business operations?
• Do they advertise and perform work for other clients?
• Who bears the risk and cost of fixing defective work?
• Who provides tools and equipment?

No single factor is decisive. The overall relationship must be considered.

Not sure? Review early

If you are uncertain, review ATO guidance before finalising an arrangement.

It is possible to reassess an arrangement after several months if circumstances change. However, leaving a worker incorrectly classified increases risk.

If a worker does not meet the contractor definition and you do not require a permanent employee, engaging them as a casual employee is often the compliant option. This ensures super is paid correctly, PAYG is withheld through payroll and reporting obligations are met.

The cost of getting it wrong

If a worker should have been treated as an employee, your business may be liable for back payment of wages, leave entitlements, allowances and superannuation. Additional charges and penalties may apply.

Incorrect classification can also disrupt payroll records and impact cash flow planning.

How First Class Accounts Ovens & Murray can help

Worker classification affects payroll setup, super processing and compliance reporting.

At First Class Accounts Ovens & Murray, we review your arrangements, ensure payroll systems are set up correctly and confirm super obligations are handled properly.

We provide reliable, consistent support so payments are accurate and on time, and your records reflect the correct employment status.

What is the difference between a contractor and an employee in Australia?

An employee works within your business and is entitled to super, PAYG withholding and Fair Work protections. A contractor operates their own business, invoices for services and has greater independence and control.

Can a sole trader be treated as a contractor?

Yes, but only if they genuinely operate an independent business. Having an ABN alone does not automatically make someone a contractor.

What happens if I classify a worker incorrectly?

You may be liable for back payment of wages, leave entitlements, superannuation and possible penalties.

Is it safer to hire someone as a casual employee instead of a contractor?

If a worker does not meet the contractor definition, engaging them as a casual employee is often the compliant option.

Digital payroll and small business payroll software

Why payroll systems still cause problems for business owners

Many businesses still rely on paper based employee records or basic spreadsheets to manage payroll. These methods are time consuming and often lead to incomplete or inaccurate records. For business owners juggling staff, clients, suppliers, and compliance, payroll can quickly become a source of stress.

In 2026, payroll expectations are higher than ever. Accurate records, timely payments, and correct reporting are no longer optional. Businesses need systems that support compliance while also providing clarity around wage costs and cash flow.

Payroll compliance is still a risk for small businesses

The Australian Taxation Office and the Fair Work Ombudsman continue to monitor payroll practices closely, particularly within small and medium sized businesses. Common issues include incorrect pay rates, missed superannuation payments, and incomplete records. These problems rarely appear overnight. They tend to build up quietly over time.

Payroll rules in Australia change regularly. Updates to modern awards, superannuation obligations, and reporting requirements mean that payroll needs ongoing attention. For business owners, keeping up with these changes manually is difficult and often unrealistic.

Digital payroll systems, including small business payroll software, are designed to manage this complexity.

Modern payroll platforms integrate directly with accounting software, apply rule updates automatically, and streamline reporting to the ATO. This reduces the risk of errors while saving time each pay run.

Payroll setup and ongoing payroll services

Payroll software on its own does not guarantee accurate or compliant payroll. The system still needs to be set up correctly, maintained properly, and used consistently each pay run.

First Class Accounts Ovens & Murray provides end to end payroll services for business owners who want payroll handled properly, without having to manage it themselves. This includes payroll setup, ongoing payroll processing, and compliance support.

Payroll is processed accurately and on time, with pay rates, leave entitlements, superannuation, and reporting obligations handled correctly. This reduces risk and removes the pressure of managing payroll internally, while giving business owners confidence that payroll is covered every pay cycle.

Reliable payroll services you can depend on

If your payroll systems feel outdated or unreliable, it may be time to review how payroll is managed in your business. The right system, combined with experienced support, can remove stress and create clarity.

We can advise on small business payroll software that suits how your team actually works, then manage payroll for you ongoing.

Contact us today to discuss payroll services for your business.

What is small business payroll software?

Small business payroll software is a digital system used to calculate wages, manage leave and superannuation, and meet reporting requirements such as Single Touch Payroll, with records stored securely and updated in line with current rules.

How does digital payroll help with compliance?

Digital payroll systems apply current tax rates, superannuation rules, and reporting requirements automatically, reducing the risk of errors.

Can a bookkeeper manage payroll for my business?

Yes. A qualified bookkeeper can set up payroll systems, process payroll, manage reporting, and ensure records are accurate and compliant.

Employing casual workers and managing payroll correctly in 2026

Employing casual workers means taking on payroll risk that must be managed correctly from day one.

Casual employees are often where payroll mistakes happen. Incorrect pay rates, missed super, inconsistent records, and poor Single Touch Payroll reporting are common issues, particularly in small and growing businesses. These mistakes rarely show up immediately, but when they do, they are expensive and time consuming to fix.

This is why casual employee payroll needs clear systems, accurate processing, and consistent oversight. First Class Accounts Ovens & Murray supports businesses by managing casual payroll properly, so employees are paid correctly and compliance is not left to chance.

Why casual payroll is more complex than it looks

Casual employees often include students, parents returning to work, or people balancing multiple roles. These employees rely on accurate and timely payroll just as much as permanent staff.

From a payroll perspective, casual staff introduce complexity. Hours vary. Awards differ. Casual loading must be applied correctly. Super eligibility must be tracked. Payroll systems must be able to handle these variables without error.

This is where many businesses struggle, particularly when payroll is handled manually or by someone who is not across current requirements.

Payroll accuracy and your reputation as an employer

Payroll accuracy directly affects your reputation as an employer. Casual employees talk. Underpayments, late pays, or incorrect super damage trust quickly.

When payroll is handled properly, casual employees are more likely to stay, pick up additional shifts, and transition into long term roles. Consistent payroll builds confidence for employees and stability for the business.

What is a casual employee and why it matters for payroll

A casual employee does not have a firm advance commitment to ongoing work. There is no guarantee of hours or duration of employment, and shifts can usually be accepted or declined.

However, payroll data tells the real story. If a casual employee works regular, predictable hours over time, this can trigger additional obligations, including conversion rights. Accurate payroll records are essential to identify this early and act before compliance issues arise.

Casual employees, casual loading, and award compliance

Casual employees receive a higher hourly rate to compensate for not receiving paid leave. This casual loading must be applied correctly under the relevant award every pay run.

Payroll errors often occur when loading is missed, awards are misapplied, or hours are not recorded accurately. These issues compound over time and frequently surface during audits or employee queries.

Payroll responsibilities when employing casual workers

Employers must ensure casual employees are paid correctly every pay run. This includes applying the correct award rate and casual loading.

Superannuation must be calculated accurately and paid on time. Super obligations now apply broadly, with stricter enforcement and limited tolerance for late payments.

Single Touch Payroll reporting is mandatory. Each pay run must be reported accurately to the ATO, including wages, tax withheld, and super information. Incorrect STP reporting creates flow on issues with the ATO and employees.

Payroll records must be complete and up to date. Hours worked, pay rates, and changes to employment arrangements must be captured correctly. Payroll systems should provide visibility so risks are identified early.

This level of accuracy requires more than basic software. It requires proper setup, ongoing checks, and experienced oversight.

How First Class Accounts Ovens & Murray supports casual payroll

First Class Accounts Ovens & Murray provides reliable, fully contracted payroll services for businesses employing casual staff.

Payroll is processed accurately and on time. Pay rates, casual loading, super, and STP reporting are handled correctly. Payroll systems are set up properly and monitored to ensure ongoing compliance.

Businesses gain confidence knowing their payroll is handled by professionals who understand the rules and apply them consistently. Employees are paid correctly. Records are accurate. Risks are identified early.

If you employ casual workers and want payroll handled properly, First Class Accounts Ovens & Murray provides the structure, systems, and reliability to support your business.

Common questions about casual employee payroll Australia

What is a casual employee in Australia?

A casual employee has no firm advance commitment to ongoing work and can usually accept or decline shifts. Payroll records must reflect how the role operates in practice.

Do casual employees get super?

Yes. Casual employees are generally entitled to superannuation, and employers must calculate and pay it correctly and on time.

What is casual loading?

Casual loading is an additional amount paid to casual employees instead of paid leave entitlements. It must be applied correctly under the relevant award.

Why is payroll important for casual staff?

Payroll accuracy affects compliance, employee trust, and cash flow. Errors can lead to penalties, underpayments, and disputes.

How can First Class Accounts Ovens & Murray help with payroll?

First Class Accounts Ovens & Murray manages payroll end to end, ensuring pay, super, and STP reporting are completed accurately and on time, without gaps or stress.

Five benefits of outsourcing your payroll

When it comes to running a business, time is an irreplaceable commodity and we are seeing more and more businesses start to outsource specialist or essential services. If you employ people, then payroll is both a specialist and essential service.

Why?

Because outsourcing payroll allows business owners to focus on their strengths and core business, leaving the complexities of systems and compliance to experts.

With the right team behind you, the benefits of outsourcing your payroll can be realised almost immediately. 

For many small and medium businesses, outsourcing payroll has also become more relevant with changes to superannuation rules, Single Touch Payroll updates, new reporting requirements, and higher expectations from employees. 

A reliable contract service such as First Class Accounts Ovens & Murray helps you stay on top of these changes and maintain accuracy every pay cycle.

Here are five benefits of outsourcing your payroll.

1. Save time

By outsourcing your payroll, time spent on compliance, regulations, and training staff on using internal systems is eliminated. 

Cloud-based payroll services can also eliminate time spent by HR updating entitlements, leave and benefits. This now includes Single Touch Payroll reporting, superannuation checking tools, and digital employee onboarding, which have added extra steps for employers.

First Class Accounts Ovens & Murray manages these tasks for you through a structured weekly or fortnightly process. You no longer need to pause your day for payroll questions, software issues, award reviews, or chasing paperwork. This saves time and reduces interruptions across your business.

If payroll takes too much of your week, outsourcing to First Class Accounts Ovens & Murray keeps everything running on time.

2. Save money

Having fewer full-time employees can cause a ripple effect on cost savings throughout an organisation, from HR and IT through to office space and utilities. Outsourcing to payroll services providers reduces the cost of hiring and retaining specialised staff – two activities that are expensive and increasingly seen as unnecessary.

Payroll software, compliance requirements, and employer obligations continue to grow, which makes it more costly to train internal staff or correct mistakes.

Outsourcing removes the need for internal payroll training, specialised systems knowledge, or paying someone to troubleshoot awards or prepare STP corrections.

With First Class Accounts Ovens & Murray, you pay for the service you need and avoid the ongoing cost of an in-house payroll role.

Outsourced payroll can reduce unnecessary overheads. If you want predictable monthly costs, we can help.

3. Compliance

For many small business owners payroll isn’t a core competency. And that means the complexity of work place agreements and EBAs increases the risk of costly errors. Keeping up with the Australian Government’s National Employee Standards (NES) requires vigilance and expertise to remain compliant.

Penalties for incorrect payroll, superannuation underpayments, and late lodgements continue to increase, and compliance checks are now more detailed across most industries.

Superannuation is now monitored more closely through digital reporting, and award changes occur more frequently. Outsourcing to a specialist payroll provider ensures that the minimum standards are adhered to and helps reduce the risk of incorrect classifications and missed entitlements.

First Class Accounts Ovens & Murray manages compliance as part of your payroll service, including employee setup, leave accruals, superannuation calculations, and STP submissions.

4. Simplified reporting

Outsourcing payroll provides complete transparency and access to accurate information that doesn’t need to be verified. Simplified reporting means, as a business owner, you can more effectively plan for growth and predict changes to your staffing needs.

Over the past few years, payroll reporting has expanded to include STP, clearer breakdowns of pay categories, and more detailed leave reporting. Accurate information helps with cash flow planning, preparing for superannuation payments, and understanding the real cost of employing staff.

First Class Accounts Ovens & Murray provides clear payroll reports and explains what the information means in practical terms so you can make informed decisions.

If you want reporting that is easy to understand, we can prepare the information you need.

5. Avoid losing payroll expertise

Outsourcing your payroll means your business maintains a consistent approach to payroll management. There’s no need to induct employees and role transfer can be reduced to the functions and outputs of the payroll service.

This has become even more important as many businesses now operate with smaller teams or experience turnover in administration roles. When payroll knowledge sits with one internal person, the risk of errors and missed deadlines increases if they are away or move to a different role.

First Class Accounts Ovens & Murray provides a documented, reliable process that continues no matter what is happening inside your business.

At the end of the day outsourcing payroll services allows you to focus on the aspects of your business that generate revenue. It also removes the stress of keeping up with award changes, system updates, and reporting deadlines.

Talk to us today about outsourcing your payroll so you can invest in strategic resources that increase value and drive the growth of your business. First Class Accounts Ovens & Murray provides a reliable contract service that continues regardless of staff changes, holidays, or internal pressures.

Common questions about outsourcing payroll

What does outsourcing payroll include?

It usually includes processing wages, superannuation, leave, onboarding, and STP reporting. First Class Accounts Ovens & Murray manages these tasks for you.

Is outsourcing payroll cost effective?

It reduces employment costs, software costs, and time spent managing compliance. Many small businesses find outsourced payroll more predictable than an in-house role.

How does outsourcing help with compliance?

A payroll provider stays across award changes, National Employment Standards (NES) requirements, and superannuation rules. First Class Accounts Ovens & Murray ensures payroll is processed accurately and on time.

What value can automation bring to your business?

Automation has the capacity to revolutionise your efficiency and productivity. But how many of the automation features that are available to you are actually being used?

Could you be getting more value by building automated processes into your operational framework?

Removing the manual workload to streamline your processes

There’s a very simple mantra when it comes to making the most of automation

If there’s a manual task in your business that’s taking up time, automate it now!

The more time you and your team spend on low-level administration, data-entry and form-filling, the less time you have available for actually running your business.

With your software tools maximised, your automated processes can be chugging along in the background, doing the heavy lifting and freeing up your time to focus on client service, sales and strategy etc.

So, which elements of your everyday operations could you be automating? And which apps and software solutions can help you to achieve your automation goals?

Here are some areas where automation and smart systems can really help to add value

Automated bookkeeping and digitisation of paperwork

Apps like Dext (formerly Receipt Bank) and Lightyear offer you the opportunity to automate your bookkeeping and record-keeping. These solutions let you snap a photo of a receipt or invoice, digitise the contents and then automatically create an expense claim or bill in your accounting system. There’s no keying in and the whole process is synced with your choice of cloud accounting platform.

First Class Accounts Ovens & Murray can assist in setting up and managing these tools, ensuring your automated bookkeeping runs seamlessly.

Automated employee expenses

Apps like Weel (formerly DiviPay) give you automated control over your employee expenses. Using either virtual or physical credit cards, your staff can pay for expenses and payments are then automatically synced with your main accounting platform.

That means no late expenses claims, no need for petty cash and no wasted time keying in the receipts. All employee expenses can be tracked, measured and paid, with the whole expenses process automated from start to finish.

First Class Accounts Ovens & Murray can implement these tools for you and manage the processes to keep your records accurate and timely.

Automated payment collection from your customers

With payment gateways like Stripe and GoCardless you can automate your cash collection. By using a modern payment gateway, you make it easier for clients to pay their bills. 

But you also automate the actual cash collection and bank reconciliation process too. Money can be instantly paid to your main business account and all the transactional data pulled across to your accounting platform. That means less admin, and faster payments too.

Talk to us at First Class Accounts Ovens & Murray about implementing these gateways to smooth your cash collection process.

Automated marketing and social media posts

Digital marketing is key to finding customers and growing your business. You can automate a large chunk of your marketing work. These solutions let you create automated emails, target specific customer audiences and track your return on investment (ROI) in forensic detail.

Where to Begin with Automation?

Automation is about making your business work smarter, not harder. With tools like Dext, Lightyear, Weel, Stripe, and GoCardless, you’re equipped to streamline key areas, reduce admin time, and focus on what truly matters.

First Class Accounts Ovens & Murray is here to help you integrate these systems seamlessly into your operations. Reach out to learn more about optimising your automation journey for efficiency and cost savings.

Talk to us about understanding the different App options to help you automate your business.

Secure Jobs and Better Pay Bill - How will it affect your business?

The Secure Jobs and Better Pay Bill 2022 was passed in November 2022 as an amendment to the Fair Work Act 2009.

Some changes start immediately, and others will roll out over the next six months to a year.

The act amends workplace relations laws relating to many aspects of employment. While not every new law will affect every employer, it's essential to understand the extensive changes that are coming.

The Main Changes

• Flexibility of working hours, enabling workers to negotiate hours that suit them.
• Collective enterprise bargaining allows employers within the same industries to negotiate common pay and conditions agreements.
• Changes to the enterprise bargaining system to make it easier for employees to initiate bargaining for an enterprise agreement where existing enterprise agreements have expired.
• Fixed term contract limitations will constrain the number of times a contract can be renewed. This should result in employers offering permanent positions to workers once the contracts have ended.
• Pay secrecy clauses in employment agreements must be removed, meaning an employer cannot force an employee to keep from discussing their pay with colleagues.
• The right to protection from sexual harassment means employers must be proactive in fostering an environment free from sexual harassment.
• Changes to the better off overall test (BOOT) should make assessing whether a proposed agreement passes the test simpler.
  Equal remuneration principles to promote gender pay equality.

What Next?

The Bill has brought significant reforms to employee entitlements that make it more important than ever to ensure your employment agreements comply with the new laws.

There will be more updates next year about the changes, but in the meantime, we recommend you prepare for the new laws that will affect your business.

Payroll Updates Sept 2022: Minimum Wage, Super Increase and STP

Are you across the recent payroll and employment law updates?

Below is a summary of these updates. 

Remember, we can help check your payroll setup, award provisions, employee agreements, and payroll costing. We can also assess if your software is ready for ATO STP Phase 2 reporting, so feel free to get in touch. 

Minimum Wage Increased on 1 July 2022

The national minimum wage increased on 1 July by 5.2% to $21.38 per hour (or $812.60 per week).

The minimum wage increase applies to employees if an award or national minimum wage defines their pay rate.

This year, the Fair Work Ombudsman (FWO) has once again implemented minimum wage increases to awards in a staggered approach. Most awards increased on 1 July; however, some will increase on 1 October.

For full details of October award increases, visit Fair Work Ombudsman October 2022 minimum wage increase. The main industries changing in October are Aviation, Hospitality and Tourism.

Tax Table Updates

While most tax tables remain the same for the 2022-23 financial year, the annual indexing of the study and training support loans have been applied.

Check the study and training support loans and working holiday makers tax tables for current withholding rates.

If you use online payroll software, the updates will be taken care of already. But if you process payroll manually, you’ll need to factor in the new rates for these tax types.

Superannuation Increase from 1 July 2022

The superannuation guarantee statutory rate increased to 10.5% on 1 July. Your payroll software should automatically update the rate, but check that the rate has updated, just in case you have manually entered the rate for some employees or payroll categories.

Review any agreements or annualised salary arrangements you have with employees that may be inclusive of superannuation.

Also, remember that the monthly $450 threshold has been removed, meaning that you must pay superannuation for all earnings. If you have a large casual workforce, this could impact your costs significantly.

Your first quarterly superannuation payment at the new rate will be due in October 2022.

Unpaid Pandemic Leave Reinstated for Some

During the COVID-19 pandemic, Schedule X was added to most awards to allow for two weeks of unpaid pandemic leave. The schedule expired in June 2022 but has been reinstated for some awards:

• Aged Care
• Ambulance and patient Transport
• Aboriginal and Torres Strait Islander Health Services
• Health Professionals and Support Services
• Supported Employment Services
• Social, Community, Home Care and Disability Services

Employees who no longer have unpaid pandemic leave available in their awards can take personal leave if unwell or use annual leave if they need to isolate themselves but are otherwise well enough to work. They can also use carer's leave if they need to look after unwell family members.

Review Your Payroll

Now is an excellent time to assess your payroll systems in readiness for the busy summer season ahead.

Talk to us. We can help check your payroll setup, award provisions, employee agreements and payroll costing. 

There are many details to take care of when engaging workers, and we can also advise on the software you are using and make sure it meets the ATO’s Single Touch Payroll reporting requirements. Note: STP reporting requirements are due for all employers by 31 December unless you use Xero, in which case the date has been extended to 31 March 2023.

Changes to Annualised Salaries in Restaurant and Hospitality Awards

Annualised salary arrangements in restaurant and hospitality awards are changing in September 2022.

After a review of the annualised arrangements in these awards, the Fair Work Commission has introduced changes that will make payments for salaried workers fairer.

Employers have been able to pay 25% on top of the base wage to allow for overtime and penalties. This meant they could do an annual reconciliation of actual hours worked to ensure the salary covered the overtime and penalties there were entitled to had they been paid by the hour. Any shortfall in wages could be paid with a single top-up payment each year.

New arrangements

The new arrangements bring in weekly outer limits to overtime and penalty hours. Employees who work more than 18 hours on weekends and public holidays within a week will need to be paid the hourly or penalty rate in addition to the regular wage.

If you’re paying staff an annual salary, the new rules mean you will need to review hours each week to check staff are not working more than the prescribed outer limits for extra hours. If they are, you will need to calculate the amount owing and pay it each week.

While an annual reconciliation of hours worked against the wages paid is still required, you can no longer wait until the end of the year to calculate and pay any shortfall.

The new system should make it fairer for salaried employees who will receive payment in the week that extra hours over the limits were worked. It should also assist with your business’s cash flow, as you'll be paying wages during busy times, and the annual top-up payment should be smaller.

Review Your Annualised Salary Agreements

If you’re paying staff a salary, there are certain obligations you have to meet.

We can help get systems in place to manage your employer obligations and make it as easy as possible to track time and perform the annual reconciliations of hours against wages paid.

Book a time to talk to us about the new provisions for restaurant and hospitality workers and how to implement them in your business.

The differences between a contractor and an employee

The terms "contractor" and “employee” can be a bit tricky to understand, but it's important for businesses of all sizes. When you're not sure if someone is really an independent contractor or employee-the penalties are severe!

There are a few reasons why a company might want to hire someone as a contractor instead of an employee. For example, the company might think that the person can get tax benefits, or they might want more flexibility in their workforce.

However, by law, it is determined by the nature of the employment relationship whether someone is an employee or contractor.

There are no exceptions to this rule.

This means that everyone has to abide by basic employment standards and entitlements, as well as statutory tax and superannuation requirements.

A breakdown of the differences between a contractor and an employee

There are some differences between contractors and employees. Here is a breakdown:

Employees:

People who work for a contract company are called employees. They work under an agreement or contract that says they will serve the employer.

Employees usually have to work in specific places and at specific times, and they usually work for only one company.

Employees are paid by the hour and their pay includes things like PAYG (Pay As You Go) taxes and other benefits.

They are also eligible for superannuation, which is a retirement savings account.

Employees have all the minimum rights required by law.

Contractor:

A contractor is someone who works for themselves under a contract.

This means that they are not employed by anyone else, but instead have a contract with one or more people or companies to do a specific job or set of jobs.

Contractors usually provide their own equipment and systems for doing the job, although this may not be the case in all situations.

They also take on more commercial risk than employees (although this also depends on the contract).

Contractors are not paid through payroll, but rather invoice for their work and receive payments directly from their clients. They have most workplace rights but different tax, insurance, and superannuation responsibilities.

An essential difference between an employee and a contractor

There is an essential difference between an employee and a contractor.

"An employee works for your company and is part of it. A contractor is their own boss and runs their own business."

How to identify if you are employing a contractor or an employee

The Australian Tax Office (ATO) has developed a tool to help you decide if someone working for you is an employee or contractor for tax and super purposes.

We recommend using this tool to help you understand if your worker is an employee or contractor for tax and super purposes.