A common issue that employers often face is the employee vs contractor relationship and the obligations that may arise. These obligations include PAYG Withholding, Superannuation Guarantee Charge, Payroll Tax & Workcover.
It’s crucial to address the key factors the ATO uses to determine whether a worker will be deemed a contractor or an employee, as well as understand the differences between the two.
Control – Can the worker control how, where & when they operate (contractor) or are they directed by the business as to how, where & when the work is done (employee)?
Integration – Does the worker provide services to the business and perform work to further their own business (contractor) or does the work serve in your business as a representative (employee)?
Remuneration and Pay – Is the worked paid for a specific outcome or result (contractor) or are they paid for their time worked (employee)?
Ability to subcontract or delegate – Can the worker delegate or subcontract their work to others (contractor) or does the worker need to perform the work themselves (employee)?
Equipment & assets – Does the worker supply their own tools & equipment (contractor) or does your business supply most of the tools (employee)?
Risk – The workers business generates goodwill from their work (contractor) rather than your business benefiting for the goodwill arising from their work (employee)?
A common myth is that just because someone has an ABN, that automatically labels them as a contractor. The range of factors discussed above ultimately lead to the correct determination being made.
If you believe your contractors may be employees, it might be time to look a little closer. Contact our office anytime for assistance.
