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Business Tips – Taking on an Employee or Contractor? Beware!

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Taking on an Employee or Contractor? Beware!

Taking on an Employee or Contractor? Beware!

Your business is getting busier and you look for more staff to help. Not always easy to find good staff, but should they be an employee or contractor? You need to get it right because penalties and back payments and interest can apply if the relationship is wrong. You are obliged to know the difference, so beware and learn the difference! The main section starts HERE.

The ATO site says –“Many businesses are getting this decision wrong as they are basing it on incorrect information. Often workers who should be employees are being incorrectly treated as contractors.

None of the following makes a worker a contractor:

  • Your business only needs them for short term or irregular work (such as during busy periods)
  • You are using their specialist qualifications or skills
  • The industry ‘norm’ is to use contractors
  • They have an Australian business number (ABN)
  • They have a registered business name

Just because a worker has an ABN or registered business name does not mean they will be a contractor for every job. To determine whether a worker is an employee or a contractor, you need to consider the whole working arrangement and look at the specific terms and conditions under which the work is performed.”

And a table helps define the difference between employee and contractor – eg one is psi for the hours, while the other for the result, only one can delegate the work by subcontracting and paying someone else to do the work, one uses and provides their own tools while the other has their tools supplied by your business and other factors that differential the two include commercial risk, control of work and independence – see the great table at ATO site HERE.

The ATO site also emphasises myths that commonly arise about employee/contractor decisions. It states:

“There are many myths about what makes a worker an employee or contractor. Often businesses rely on these myths and get the employee or contractor decision wrong.


To ensure you know fact from fiction when determining whether your worker is an employee or contractor, we discuss some of the most common myths about:

Another great part of the site is the decision tool:

“To get an answer about whether your worker is an employee or contractor, use our Employee/contractor decision tool. It is free, anonymous and easy to use.”

What are your experiences of employing staff? Do you always determine if you will employ or contract? Write about it below!



Author: Account keeping plus (Business accounting software

Administration, Bookkeeping and Compliance for small business, and Self-Managed Super Funds (SMSF) Training, trouble-shooting, or we can do the books and payroll for you! Self Managed Superannuation Fund Service Provider, Free support 30 min call 0407 361 596 Australia (+61 drop 0 from overseas) MYOB Certified Consultant, Reckon/QuickBooks Professional Partner.

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