| MYTHS | FACTS |
| People who do short-term work are automatically a contractor. | The length or the regularity of the jobs cannot differentiate a worker as an employee or contractor. Both employees and contractors can be hired for:
· Casual, temporary or infrequent work · Busy periods · Short jobs, specific task and projects. |
| If a worker’s contract has a section that says they are a contractor, then legally they are a contractor? | If a worker is legally an employee, having a written agreement will not:
· Override the employment relationships or make the worker a contractor. · Remove an employer’s tax and super obligations. |
| If a worker submits an invoice for their work, they are a contractor. | Submitting an invoice for work done or being paid on invoice doesn’t make a worker is a contractor.
In order to know whether a worker is an employee or contractor, you need to look at the whole working arrangement and examine the specific terms and conditions. |
| Workers with an ABN are always a contractor. | Having an ABN is not a deciding factor of whether or not a worker is a contractor. All of the conditions of the working arrangements are relevant. |
| The majority of the people in your industry are contractors, which means you should be too. | Just because contingent workforce is common in the industry, it doesn’t necessarily mean that a particular person should be treated as a contractor too. |
| If a worker uses their specialised skill and qualification, they are contractors. | If a business takes on a worker for their specialist skills or qualifications it doesn’t automatically mean they are a contractor.
A worker with specialist skills or qualifications can be either an employee or contractor depending on the terms and conditions under which the work is done. |
| A business should only hire contractors so that they don’t have to worry about Super. | Businesses may be required to pay Super for their contractors. If you pay an individual contractor under a contract that is wholly or principally for the person’s labour, you have to pay super contributions for them. |
| If a worker is a contractor for one job, they will be a contractor for all the jobs. | The working arrangement and specific terms and conditions will determine whether a worker is an employee or a contractor for each job.
A worker could be an employee for one job and a contractor for the next job. |
| If a worker has a registered business, they are a contractor. | Having a registered business name doesn’t determine whether a worker is an employee or contractor. |
| A worker cannot work more than 80% of their time for one business if they want to be considered as a contractor. | The 80% rule, or the 80/20 rule as it is sometimes called, relates to personal services income (PSI) and can change how a contractor:
· Reports their income in their own tax-return. · Claims some business-like deductions. |
| My business has always used contractors, so we don’t need to check whether new workers are employees or contractors. | Before hiring a new worker, you should always check whether the worker is an employee or contractor by examining the working arrangement.
Unless a working arrangement (including the specific terms and conditions under which the work is done) is identical to a previous arrangement you have already checked, the outcome could be different. Hiring workers without checking the working arrangement could mean the business is incorrectly treating all future workers as contractors when they are employees. |
| If a worker wants to be a contractor, the business should treat them as one. | Just because a worker has a preference to work as a contractor doesn’t mean your business can engage them as a contractor. Whether a worker is an employee or contractor is not a matter of choice, but depends entirely on the working arrangements and the specific terms and conditions.
If you give into pressure and agree to treat an employee as a contractor, you can face penalties and charges for not meeting your tax and super obligations. |
Pendragon can help you run your business more efficiently, saving you time and money.
For further information please don’t hesitate to contact us, book an appointment or reach us at [email protected] or 02 9407 8700 where one of our Australian team members will gladly help you.
