Contractor or employee

How can you determine the difference between a Contractor and an Employee?

November 3, 2017 | By Heidi Rawson, Vitil

This is a common question for Vitil's Human Resource Services Perth team from our clients. How can you determine the difference between a Contractor and Employee?

An independent contract, a contract for services, is between a principal and an independent contractor. This is different to an employee, who must follow instructions from his or her employer in the execution of his or her obligations, therefore offering a contract of services.

An independent contractor, should operate independent of the principal. The principal's main concern is the product of the contract rather than how the contract is fulfilled.

The information provided by the Fair Work Ombudsmen provides a more comprehensive overview of the differences between the two arrangements, with the link provided below.

As a business owner, it is always wise to seek advice from a Human Resource Services professional as it is very important from a legal perspective to understand what a sham independent contracting arrangement is. The Fair work Omudsmen details a sham contract to be the following:

A sham contracting arrangement occurs where an employer attempts to disguise an employment relationship as an independent contracting arrangement. This is usually done for the purposes of avoiding responsibility for employee entitlements.

Under the sham contracting provisions of the Fair Work Act 2009, a Perth employer cannot:

  • misrepresent an employment relationship or a proposed employment arrangement as an independent contracting arrangement
  • dismiss or threaten to dismiss an employee for the purpose of engaging them as an independent contractor
  • make a knowingly false statement to persuade or influence an employee to become an independent contractor.

More information

Vitil Human Resource Consultants

If you have any questions or concerns, contact Vitil's Human Resource Consultants. Vitil HR is a boutique HR consulting firm based across Perth, who offer flexible, reliable and affordable outsourced human resource support and recruitment services, where your team is the key focus.

By outsourcing HR to an expert in Human Resource Services, our experienced professionals can objectively assess your environment, your human capital needs, and ensure you recruit to further develop your businesses performance.

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