Independent Contracting Traps

If you are an independent contractor, you are not an employee but are working for yourself. Generally, independent contractors are running their own business, and the emphasis is on getting a particular job finished, rather than working a particular number of hours.

However, in some circumstances, workers may regard themselves as employees, but the person they are working for considers them to be independent contractors. This may be because the person they work for has decided it is cheaper or that it limits their legal obligations.

A worker engaged as an independent contractor may later be legally recognised as an employee (and vice versa) in certain circumstances. It is important to understand this, because many laws which protect employees’ rights do not apply to people classified as independent contractors.

Independent contractor or employee?

Whether a worker is an employee or an independent contractor depends on a range of factors taken together, regardless of whether they are called an independent contractor (for example, in the wording of a contract). For example, you are more likely to be seen to be an independent contractor if your contract indicates that:

• you have control over what, when and how work is done — the greater the control your principal (boss) has, the more likely it is that an employment relationship exists;
• you are running your own business, e.g:
• you have registered a business or company and have an ABN,
• you have made a significant investment in your own tools and equipment,
• your pay is based on a result or the completion of a task rather than the hours you work,
• you bear commercial risk for the work being done,
• you can work for more than one principal,
• you are free to get other people to do the work for you.

Not one of these factors is enough, by itself, to make somebody an independent contractor. All the factors are considered. If you are unsure as to whether you are really working as an independent contractor, contact JobWatch, your union, or a lawyer for further assistance.

Implications for contractors

• Workers compensation / WorkCover
• Occupational health and safety
• Superannuation
• Taxation
• Unfair dismissal
• Wages and conditions

For more information about implications for independent contractors, download the Fact Sheet.

For further support

Call our Telephone Information Service on Melbourne Metro (03) 9662 1933 or Regional Victoria, Queensland and Tasmania on 1800 331 617.