There is no single factor that determines whether an individual is a contractor or an employee. It is a complicated issue.
A court will look at lots of different factors of the relationship between the parties to decide whether the worker is an employee or a contractor.
There are some questions you can ask yourself to help you decide if someone is an employee or an independent contractor but you need to make an overall assessment.
Just because you don’t pay someone’s superannuation contributions doesn’t mean they are a contractor, they may actually be considered an employee. This could mean that you may be underpaying them.
Having an ABN doesn’t make someone a contractor. If they are performing more than 80% of their work for one business, it is likely they are an employee.
Even if the worker is submitting invoices, has an ABN and is registered for GST, they may still be considered an employee.
perform work, under the direction and control of their employer, on an ongoing basis
are entitled to have superannuation contributions paid into a nominated superannuation fund by their employer
have income tax deducted by their employer
are entitled to be paid regularly (e.g. weekly / fortnightly / monthly)
are entitled to get paid leave (e.g. annual leave, personal / carer's leave, long-service leave) if they are a permanent employee.
work set or standard hours (casual employees hours can vary from week to week)
usually have an ongoing expectation of work (and should have an employment contract)
are provided with tools by their employer or a tool allowance is provided
decide how to carry out the work and what expertise is needed and can engage workers to help complete the work
bear the risk for making a profit or loss on each job
generally pay their own superannuation and tax, including GST and have their own insurance
are usually contracted to work for a set period of time (for example, 2 months), or to do a set task
generally submit an invoice for work completed or are paid at the end of the contract or project
usually work for more than one client at a time
quote on a job
use their own tools and equipment
have an ABN and submit invoices
There won’t be one thing on its own that decides whether a worker is an employee or an independent contractor.
Just because someone has an ABN or issues invoices doesn’t automatically make them an independent contractor.