Distinguishing independent contractors from employees is important for businesses particularly with the spotlight on sham contracting arrangements where fines are applied to misrepresentation of the employment relationship.
It is generally considered that an employer/employee relationship is one ‘of service’ whereas a principal/independent contractor relationship is one ‘for service’.
An independent contractor typically contracts to achieve a result, where an employee contracts to provide their labour to enable the employer to achieve a result.
Most independent contractors run their own business, control their own working times and decide how and where they undertake work. Many independent contractors also advertise their business, provide their own tools and equipment and may pay others to carry out work on their behalf.
In contrast, employees are typically subject to controls on how, where and when their work is performed. They are paid regularly and cannot pay someone else to do their work for them.
Having or obtaining an ABN does not automatically mean a person will be classed as an independent contractor for the purposes of the independent contractor’s legislation.
Confused? There are a list of factors to assist in assessing whether an independent contracting relationship exists. If you want more information just leave me a comment below or call me on 0401 665 981 and I will send you this list free of charge.