The Fine Line Between Employee or Contractor 1

The Fine Line Between Employee or Contractor

There is a fine line when determining whether your workers are employees or contractors, it seems to be a grey area that continues to fly under the radar in the construction industry. Every business wants to cut costs, meet deadlines on time and hire workers with minimal effort. Unfortunately, this has led to a percentage of the industry adopting less than compliant practices when hiring workers.


It has become common practice for employers to assume that if a ‘worker has an ABN they’re a contractor.’ Unfortunately, just because they have an ABN this does not automatically mean they are a contractor. However, businesses will often use this excuse in an attempt to avoid their PAYG withholding and superannuation obligations. Regardless of an ABN, it all boils down to the working arrangements of employment. As the Australian Tax Office states,

“Having an ABN makes no difference to whether a worker is an employee or contractor for a job”.

As a business you should ensure that you have identified the differences between an employee and contractor. Just because a worker has requested to be treated as a contractor does not mean they can engage in the business as one. This can even include submission of invoices. Remember to always refer back to the working arrangement and terms and conditions as employers can receive harsh penalties and charges for incorrect tax and super requirements.


In the construction industry, project managers, CEO’s and other executives often find themselves fighting against the clock. How many times have you been caught between a hard place and a rock and found yourself hiring a ‘contractor’ for a short period of time because it was the easiest option? The length of a job makes no difference, whether you need a contractor or an employee, both can be used for any situation. This can include:


– Casual or Temporary

– On-call or busy periods

– Short jobs, specific tasks and projects and or specialists


Now I know you are probably thinking that you would obviously hire a contractor for tax purposes and super obligations but just because they are contractor does not necessarily mean you can avoid super. The ATO states:


Businesses may be required to pay super for their contractors. If you pay an individual contractor under a contract that is wholly or principally for the persons labour, you have to pay super contributions for them.”



If you needed assistance in figuring out the difference between the two, the ATO has created an easy-to-use decision tool which can aid businesses with meeting their tax and super obligations.

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