The building industry has the highest percentage of independent contractors of all Australian industries. Many workers like the freedom of running their own business and being their own boss. Others enjoy the security of working for a company.
Before you make a decision about how you perform your work it is important that you know what you are entitled to.
What your employer pays for
Contractors are often paid a higher hourly rate of pay than employees. However, this does not take into account the additional entitlements that employees are provided and the extra responsibilities that rest with the contractor.
This comparison table lists what an employer must provide to each category of worker:
|
|
Full time employee |
Casual employee |
Contractor |
|
Paid Annual Leave |
ü |
|
|
|
Paid Sick Leave |
ü |
|
|
|
Overtime |
ü |
ü |
|
|
Guaranteed minimum hours of paid work |
ü |
|
|
|
Superannuation |
ü |
ü |
* |
|
Paid Public Holiday |
ü |
|
|
|
Worker’s Compensation |
ü |
ü |
* |
|
Long Service Leave levy |
ü |
ü |
|
|
Public liability insurance |
ü |
ü |
|
|
Notice of termination |
ü |
|
|
|
Income protection |
ü (in the form of sick leave) |
|
|
Superannuation
If you are a contractor under a contract that is principally for labour, the person who hires you may have to pay your superannuation. Even if you quote an ABN, you may still be considered an employee for superannuation guarantee purposes.
The ATO website has information and tools to help you make this assessment: www.ato.gov.au
Worker’s compensation
Some people working as contractors are also treated as workers for worker’s compensation purposes, depending on the individual circumstances. The laws covering worker’s compensation vary from state to state. Information can be obtained from your state or territory’s OHS and worker’s compensation agency.
What about tax?
Contractors are required to complete their own Business Activity Statement and pay their own tax. Contractors may be able to claim more expenses as tax deductions than an employee. However, the onus is on the individual to ensure that their tax records and payments are correct, and that they comply with all tax laws.
As an employee your employer will deduct tax from your pay and send these payments to the ATO on your behalf.
More information on your tax requirements is available on the ATO website.
If I am offered a job as an employee, can I choose to be an Independent Contractor?
There are a number of factors that will determine if you are an employee or an independent contractor. How you perform your job and how you are paid are two significant factors in this determination. The ABCC fact sheet “Am I an Independent Contractor?” provides more information on the common law test, which will assist you in assessing your status.
If an employer hires you as an independent contractor but it is later shown that you are actually an employee, the employer may be breaching sham contracting laws. A sham contracting arrangement is where an employer disguises a genuine employment arrangement as independent contracting. It is your employer’s responsibility to ensure that you are correctly hired as either a contractor or an employee.
The ABCC will investigate any complaints about sham contracting in the industry, including complaints from employers that have been approached by workers wanting to be engaged as contractors. The ABCC may choose to refer workers’ details to the ATO if it believes they may be claiming to be a contractor to avoid paying tax.