“Contractor vs Employee? The mystery is solved!”
It’s a grey area when it comes to employment, and for that reason, one that is often ignored until it inevitably rears its head in the form of penalties and fines for the employer; especially when it comes to tax and super for workers. So it’s time to address the myths around whether workers are classified as contractors or employees.
In the interest of making a complicated area easier to understand, let’s begin by identifying the difference between the two classifications:
- Employees: work for and are part of your business.
- Contractors: run their own businesses and provide services to your business.
It is important to understand that the distinction between contractor vs employee, is not a choice you as the employer make. Dependent on the business and industry you operate in, there will be rules that determine the classification of every individual worker.
The 4 Assumptions that DON’T count!
Surprisingly, none of the following have any impact on the decision:
1. An ABN (Australian Business Number)
You are correct in assuming that workers can work as contractors if they have an ABN, but just because they have one does not automatically mean that they are a contractor for your business.
If the employee is hired for employment, holding an ABN has no bearing on the arrangement.
2. Everyone’s doing it that way!
It may be so that everyone in your industry is using contractors, but that doesn’t mean they are correct in doing so, or that you should automatically follow.
Checking with your accountant about your worker arrangements is a far safer way to determine the best way to proceed than following standard industry practice.
3. They are only working with me because of their specialist skills
Even if your worker has been hired due to having certain skills or qualifications, it does not always mean they should be considered a contractor.
It is entirely dependent on the terms the work is being completed under which will determine if an employee is a contractor or an employee.
4. They want to be put on as a contractor
Whether the worker elects to work as a contractor has little impact on what they should legally be considered.
As was previously stated, neither the employer nor the employee can make a choice about what to pay or be paid as – which is why it is best to consult with your accountant in order to make sure things are being done right.
It’s crucial to note that you being “pretty sure” you are handling the situation correctly will not hold up in a case against your business for incorrect working conditions and rights for your workers.
Relax, there is help at at hand!
That is why the ATO offers a free tool for business owners to give an indication of the classification of each individual worker, based on a few simple questions. To determine the contractor vs employee dilemma simply go to this free ATO Online Tool and solve the mystery for yourself levitra online purchase.
It doesn’t take very long for the tool to give you an indication of whether your worker is an employee or a contractor, and it will also assist you in understanding the tax and superannuation requirements of the specific working classification.
Though the tool provides you a good indication, it is only an indication and cannot be relied upon if the ATO is to check up on you. If you think you have a situation where you have a contractor who could be seen as to be an employee (or visa-versa), then you need to talk to an accountant about the implications. If you are still confused, unsure or have questions regarding your employees, speak to the team at Catalyst Accountants, and get some clarity around your employees and contract workers.
