Australia: Contractor or Employee: Clarifying risk for employers

Last Updated: 14 October 2014
Article by Emily Slaytor and Shawn Skyring

Clients are increasingly seeking our advice on issues applicable to workers engaged as independent contractors. In many cases the true nature of the relationship was that of employer and employee, and the "contractor" in question would be classified at law as an employee.

Where an employee is engaged as an independent contractor, there exists exposure to a number of potential claims against business owners, particularly with respect to the Fair Work Act 2009 (Cth), but also under:

  • the Income Tax Assessment Act 1997 (Cth);
  • the Superannuation Guarantee (Administration) Act 1992 (Cth);
  • Workers Compensation and Work Health and Safety Legislation; and
  • other employment related legislation such as those applying to long service leave.
There is no statutory definition of an "independent contractor".
There are simply guidelines and factors that assist to inform the nature of the arrangement.

Problems can arise when an organisation (or "engaging entity") seeks to employ a specific individual as a contractor on a regular basis. Even where a corporate structure is in place, this can still be a grey area.


The absence of a clear and simple definition is problematic.

Even the courts have acknowledged that "workers and those who employ or engage them require more clarity from this law. That is particularly so when important legislation such as the Fair Work Act... have steadfastly avoided defining what is an employee, yet demand (on paid of civil penalty) that there be no misrepresentation as to the nature of the work relationship." 1

We have seen employers assume that, just because they have called a worker a "contractor" and have required that worker to obtain an Australian Business Number ("ABN") and invoice the employer, then the employer can avoid the industrial law obligations ordinarily applied to employees.

However, this is often not the case.

There are a number of factors which go to the question as to whether a worker is properly classified as an employee or an independent contractor. The courts will always look at the "totality of the relationship between the parties" when determining the true standing of a person's employment.


The "multi-factor" test is of much assistance in considering the totality of the relationship between the worker and the engaging entity. Some of the factors to consider will be of more relevance than others given the diversity of modern working arrangements. They include:

  • Does the engaging entity control and direct, or have the capacity to control and direct, the manner in which the work is performed by the worker?
  • Is the worker performing work which is a key part of the engaging entity's business?
  • Does the worker generate any goodwill for themselves?
  • Is the worker being engaged to perform a specific task and achieve a specific result, or is that person paid for the hours worked?
  • Does the contract between the engaging entity and the worker require the work to be performed personally or can the worker delegate the task to someone else? That is, does the worker have the right to pay another person
  • to do the work instead?
  • Which party bears the liability for any losses resulting from substandard work and is the worker liable for the cost of rectifying any defect in the work performed?
  • Does the worker supply his or her own tools and equipment?
  • Is the worker also free to work for others at the same time as working for the engaging entity?
  • Which party determines the working hours and any leave requirements?
  • What are the leave arrangements in place for the worker?
  • What is the basis for the amount agreed to be paid to the worker? Does the payment represent a quoted price for an agreed/predetermined result, a set amount per period, or a price per item/activity?
  • On what basis are payments made? In particular, are attendance records and/or timesheets kept or does the worker invoice the engaging entity?
  • How is the work arrangement set up and what are the terms of any agreement between the parties?
  • Does the worker have his or her own ABN?
  • What are the income tax and GST arrangements in place?
Ultimately, it is the substance and reality of the relationship between the parties that is paramount.
To use a colloquial expression, if it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.


In a recent decision, Justice Bromberg of the Federal Court described the "focal point" around which the relevant factors can be examined as follows:

  1. Is the person performing the work as an entrepreneur who owns and operates a business; and
  2. In performing the work, is that person working in and for that person's business as a representative of that business and not of the business receiving the work? If the answer to that question is yes, in the performance of that particular work, the person is likely to be an independent contractor. If no, then the person is likely to be an employee." 2


Hunt & Hunt is hosting a complimentary seminar in October at both our Sydney CBD and Macquarie Park offices to discuss the recent case decisions in this area, and the:

  • Key differences between employment relationships and principal/contractor arrangements
  • How to engage contractors more effectively and the potential consequences of getting it wrong.

Independent contractor: contracts out his or her labour in furtherance of his or her own business. They build their own good will and work to make their own business profitable and successful.

Employee: works for an employer in furtherance of the employer's business. The employee works to build their employer's good will and make the employer's business more profitable and successful.




(Breakfast Presentation) (Lunchtime Presentation)

Date: Tuesday 14 October 2014

Time: 7:45 am registration (includes a light breakfast)
8:00 am - 9:00 am presentation

Venue: Hunt & Hunt Sydney CBD, Level 13,
Gateway Building, 1 Macquarie Place, Sydney

Date: Wednesday 15 October 2014

Time: 12:45 pm registration (a light lunch will be provided)
1:00 pm - 2:00 pm presentation

Venue: Hunt & Hunt North Ryde, Level 2,
Panasonic Building, 1 Innovation Road, Macquarie Park


1 On call Interpreters and Translators Agency Pty Ltd (ACN 006 272 760) v Commissioner of Taxation (No. 3) [2011] 279 ALR 341 per Bromberg J at 380.
2 On call Interpreters and Translators Agency Pty Ltd (ACN 006 272 760) v Commissioner of Taxation (No. 3) [2011] 279 ALR 341 at 381.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.