Independent contractors

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There will be new laws starting on 26 August 2024 which change the definition of an employer and employee, which may affect the information on this page. We will update our website at this time. For more on these new laws, see Independent contractor changes.

If you are an independent contractor, you are your own boss and have different rights and responsibilities compared to a regular employee. This page will help you understand what it means to be an independent contractor and what your legal rights are.

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What is the difference between an independent contractor and an employee?

Whether someone is an independent contractor or an employee depends on what the parties agreed to when the work started, which is often written in a contract, or it might be verbal.

It is important to consider the types of rights and work included in the contract, as these are the main things which will determine whether someone is an independent contractor or an employee. The ongoing nature of the working relationship may also be relevant. For instance, a contract might label someone as an independent contractor, but the actual way they perform their work will help determine if they are indeed an independent contractor or actually an employee.

Someone who is an independent contractor might:

  • Be hired for a specific task
  • Supply their own tools and equipment
  • Do work when and how they want
  • Have their own workplace
  • Have their own insurance (e.g., public liability insurance)
  • Spend some of their income on their own business expenses

Someone who is an employee might:

  • Be paid a regular wage or salary
  • Have tax taken out of their pay by their employer
  • Have paid holidays and sick leave
  • Be told what hours they have to work, and where they have to work
  • Be asked to wear a specific uniform
  • Be supplied with tools and equipment
  • Is required to do the job themselves – they can’t contract out the work.

If you need help working out if you’re an independent contractor or employee, contact us here for free legal advice.

Am I an independent contractor if my contract says that I am?

Usually what the contract says determines your type of employment. But if your employer tells you that you are an independent contractor when you are really an employee, this might be a ‘sham contract’. See our page on sham contracting for more information.

An employer cannot tell an employee they are an independent contractor if they are not, unless they ‘reasonably believed’ that they were an independent contractor.

What are my working rights as an independent contractor?

Independent contractors have different rights and obligations to employees. This is because they provide services to another person or business rather than being employed by that person or business. In that way, they are their own ‘boss’.

Minimum entitlements

Independent contractors don’t get entitlements that employees get such as a minimum wage, maximum weekly hours, leave and notice of termination unless they negotiate for these to be part of their contract.

Tax and super

Independent contractors need to pay their own income tax on the money they earn. They may also need to make their own superannuation contributions.

See Help for independent contractors from the Fair Work Ombudsman for more information.

Independent contractors in the building industry

Over 20% of workers in the construction industry work as independent contractors, the highest number out of any industry in Australia. Most of these workers are tradies like plumbers, chippies and sparkies. In this industry, they’re often known as subcontractors, or ‘subbies’.

If you work in this industry, you may notice that many workers are subcontractors, have ABNs, and are hired for short-term jobs. Even though these practices are common, it doesn’t mean you will always have to work as an independent contractor if you work in construction. See ‘Myths and facts’ from the ATO for other common myths which are often seen in the construction industry.

If you work in this industry and are unsure if you’re an employee or independent contractor us here for free advice.

Where can I get further help?

For further information and advice about independent contractors, including your rights, entitlements and obligations, visit the Fair Work Ombudsman website or call the Fair Work Infoline on 13 13 94 (8.00am – 5.30pm, Monday to Friday).

If you are under 25 and need assistance, or if you have a question that hasn't been answered here, please contact us here for free legal advice.

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