It is important to correctly determine whether your worker is an employee or a contractor as different rules by different regulators apply to both. For example, the tax and superannuation obligations that are applicable to your worker are dependent on whether they are considered an employee or a contractor.
Whether a worker is considered a contractor or an employee can be determined by answering the following questions:
• What degree of control do you have over how the work is performed?
• Is there a requirement of certain hours in which your worker must be on site?
• What is the method of payment? Do you pay your workers at regular intervals?
• Do you pay your workers sick leave or holiday entitlements?
• Do you provide your worker with the equipment they need to complete the work?
• Do you require your worker to wear your company’s uniform?
• Do you reimburse your worker for expenses they have incurred whilst working on your jobs?
• If the work carried out by your worker is defective, is it your responsibility to fix it?
• Does your worker have an expectation of more work in the future?
• Do you pay your worker’s tax on their behalf?
If you have answered yes to any of the questions posed above, your worker may be considered an employee based on the common law.
Other factors which may be taken into consideration include:
- Can the worker can delegate the work to another person?
If you answered yes, then this is indicative of a Principal and Contractor relationship.
- What are the terms of the contract between you and your worker? Have you contracted with an individual or company that employs the individual?
If you have contracted with an individual then this may suggest an employer-employee relationship. If you have contracted with a company then this is indicative of a principal-contractor relationship.
- Is more than 80% of the work carried by the worker for your company?
If the answer is yes then the worker is an employee for taxation purposes.
If after answering the above questions you have determined that your worker would likely be considered an employee, then it is important that you satisfy all your legal obligations as an employer, such as tax, superannuation and workers compensation requirements. If you need any further advice in relation to the issues identified above, the team at The Quinn Group can help. Contact us on 02 9223 9166 or fill out an online enquiry.