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Home | Blog | Independent contractor v employment arrangements

Accompanying developments in technology are debates about the effects these changes will have on working arrangements and what constitutes an employment relationship. New industries such as Uber and Air Tasker have raised new questions about what an employment relationship is. The issue of whether a relationship is a contract for service (independent contractor relationship) or a contract of service (employment relationship), is not entirely determined by the parties. The law recognises that there is a power relationship between the person being engaged and the business or individual who is engaging them. The fact a contract states that it is a “contract for service” is not necessarily definitive.

General Principles

The law looks at the intention of the parties as well as whether the person is a PAYE tax earner.  Nevertheless, these are not definitive factors as to the status of the relationship. The issue is sometimes contentious as employees have rights to annual leave, long service leave, redundancy entitlement and minimum rates of pay. These things are not entitlements under contract for service or an independent contractor relationship.

The Control Test

One of the central factors which determines whether someone is an independent contractor or an employee is the level of control that they have over their work. Factors such as who controls the hours that are worked, the clothes that are worn and the method by which the work is undertaken are looked at. The greater the level of control that a person or business has that is engaging you; the more likely you are to be classed as an employee.

Multi-factor Test

A number of other factors are used to determine the nature of the relationship. Factors that are considered are:

  1. Are they paid according to task completion as opposed to hours worked?
  2. Are they free to work for others at the same time?
  3. Do they incur any profit from the job?
  4. Do they have a right to sub-contract?

All of these factors are taken into consideration when determining if someone is an employee or a contractor. The more answers to these questions are “yes”; the more likely it is an independent contractor relationship.

If you are being described as contractor, but believe that you may actually be in an employment relationship and you have been denied the benefits of being an employee, you should contact our employment lawyers for advice on your potential rights and entitlements.

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