Contractors' entitlements

Who is an employee? Who is an independent contractor?

The Independent Contractors Act 2006 in conjunction with the Fair Work Act 2009 protect the rights and entitlements of independent contractors.

There are a number of factors which may contribute to determining the difference between an employee and independent contractor. However, it is important to note that no single indicator can determine if a person is a contractor or an employee. Each determination is based on the individual merits of the work arrangement in place. Courts always look at the totality of the relationship between the parties when determining the status of a person's employment.

There are some common indicators that may contribute to determining whether a person is an employee or independent contractor:

https://www.fairwork.gov.au/how-we-will-help/templates-and-guides/fact-sheets/rights-and-obligations/independent-contractors-and-employees

Indicator	Employee	Independent Contractor
Degree of control over how work is performed	Performs work, under the direction and control of their employer, on an ongoing basis.	Has a high level of control in how the work is done.
Hours of work	Generally works standard or set hours (note: a casual employee's hours may vary from week to week).	Under agreement, decides what hours to work to complete the specific task.
Expectation of work	Usually has an ongoing expectation of work (note: some employees may be engaged for a specific task or specific period).	Usually engaged for a specific task.
Risk	Bears no financial risk (this is the responsibility of their employer).	Bears the risk for making a profit or loss on each task. Usually bears responsibility and liability for poor work or injury sustained while performing the task. As such, contractors generally have their own insurance policy.
Superannuation	Entitled to have superannuation contributions paid into a nominated superannuation fund by their employer.	Pays their own superannuation (note: in some circumstances independent contractors may be entitled to be paid superannuation contributions).
Tools and equipment	Tools and equipment are generally provided by the employer, or a tool allowance is provided.	Uses their own tools and equipment (note: alternative arrangements may be made within a contract for services).
Tax	Has income tax deducted by their employer.	Pays their own tax and GST to the Australian Taxation Office.
Method of payment	Paid regularly (for example, weekly/fortnightly/monthly).	Has obtained an ABN and submits an invoice for work completed or is paid at the end of the contract or project.
Leave	Entitled to receive paid leave (for example, annual leave, personal/carers' leave, long service leave) or receive a loading in lieu of leave entitlements in the case of casual employees.	Does not receive paid leave.

Contractor rights & protections

Last Updated: 18 March 2020

Contractors have different workplace rights and protections from employees. Whether you're a contractor or you hire contractors, it's important to understand the different rules. Find out about contractor rights and protections.

On this pageProtections at workUnfair contractsWork health and safety

Protections at work

Under the Fair Work Act 2009, independent contractors are protected from:

adverse action – for example, a business cannot terminate a contract with an independent contractor because they make a complaint to a regulator about their workplace rights

coercion –  for example, a business cannot threaten to take action against an independent contractor to coerce them not to exercise their workplace rights

abuses of freedom of association – independent contractors are free to join, or not join, a trade union or employer group

Unfair contracts

The Independent Contractors Act 2006 allows independent contractors to ask a court to review a contract on the grounds that it is 'unfair' or 'harsh'. The court may consider:

the terms of the contract when it was made

the relative bargaining strengths of the contract parties and, if applicable, anyone acting on their behalf

whether there was any undue influence or pressure, or any unfair tactics used against, a party to the contract

whether the contract provides remuneration that is less than that of an employee doing similar work

any other matters the court thinks is relevant

The court may order:

the terms of the contract to be changed (for example, they may be added or removed)

the whole contract, or part of the contract 

be 'set aside' (that is, have no effect)

Sham contracting

If you have been engaged as a contractor but believe you’re an employee, you may be in a sham contracting arrangement.

A sham contracting arrangement is when an employer attempts to disguise an employment relationship as a contractor relationship. They may do this to avoid certain taxes and their responsibility for employee entitlements like:

• minimum wages
• superannuation
• leave

It’s illegal for an employer to:

• misrepresent an employment relationship as an independent contracting arrangement
• dismiss or threaten to dismiss an employee for the purpose of engaging them as a contractor

• say something false to persuade an employee to become a contractor