When is a person an employee or a contractor? It is important to know the answer to this question as it determines the rights and responsibilities of both the employer and the person employed.
If a person is employed as 'a contractor' then the employer is not required to provide remuneration in the form of superannuation, injury compensation, sick pay or holiday pay. Furthermore a contractor does not have the same protection under the law as an employee. A contractor can be hired and fired at will.
Employees are defined as workers employed under a contract of service, while contractors are defined as workers employed under a contract for services.
Contractors earn their livelihoods from their own independent business, that is they are self-employed. However, many employers have hired workers as contractors as a smart way to get around the labour laws protecting the rights of works. Workers caught in such situations have brought legal proceedings against employers either through Unions or through Government Agencies such as the Tax Office.
As a result of legal proceedings, the main method for determining the difference between contractors and employers is called 'The Control Test'.
If a person, going about the course of their employment, use their own tools, set their own hours of work and determine their own work practices, then that person may be deemed a contractor. A contractor is not 'controlled" by the employer in the manner in which they work.
On the other hand, if a worker is regularly working hours set by the employer, is using equipment provided by the employer and is working according to instructions provided by the employer, then that worker may be deemed an employee.
Resolving the question of whether a person is an employee or contractor has considerable consequences. Not only are employees protected by employment laws, but if an employee, in the course of their work, has an accident, then the employer is liable for any damages.