Employee or Contractor? A step by step guide

Hiring staff is hard. The current state of employment law in Australia doesn’t help either. That’s why Finlit is here to guide you through figuring out which of your staff should be employees, or contractors.


Start by asking ‘Am I hiring this person mainly for their labour?’. If the answer is yes, they are probably an employee. This distinction comes from the Superannuation Act 1992.


Next, check out FairWork’s comparison table. Previous rulings have often been decided by whether the contractor provides their own tools for the job, and whether they have the ability to subcontract the work to someone else. A worker having their own ABN often makes little difference as to whether they should be a contractor or employee.


Recently, the ATO has recently launched a decision making tool , however it often produces the result that your stuff are somewhere in-between contractor and employee. The nice thing about this decision tool is that you can rely on the result with reasonable confidence, as long as the information you entered was correct (see ATO disclaimer at the bottom of the page).


Finally, you can also request a private ruling from the ATO as to your own specific tax requirements with staff. This decision can be legally binding, giving you peace of mind to employee the right staff.


p.s. We get this process can be hard, but we’re here to help. Reach out to us at cc@finlit.co and we’ll set you on the right path.

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