Employee VS Subcontractor

This is one tricky topic. I have seen a few business owners get lost in the ATO’s jargon as to what constitutes an employee to a subcontractor. I have tried to break it down below.

Employee

• work under your (the business owner's) control;
• paid for the time they work;
• receive paid leave (sick, annual, long service, and so on);
• use materials or equipment provided by the business to do their job;
• perform the duties of the position;
• have agreed to provide their personal services;
• work hours which are set by an agreement or an award;
• are recognized as part and parcel of the business; and
• Take no commercial risk and cannot make a profit or loss from the work performed.

Subcontractor

• Are they paid for results achieved?
• Do they provide all or most of the necessary materials and equipment to complete the job?
• Are they free to delegate work to others (including subcontractors)?
• Do they have freedom in the way the work is done?
• Do they provide services to the general public and other businesses?
• Are they free to accept or refuse work?
• Are they in a position to make a profit or suffer a loss

Of course you should seek advice from your tax accountant before making any sudden changes to the way you pay people.