Often an individual may believe they are a contractor due to their engagement with an organisation being through the use of their ABN.
Equally a manager may presume the use of invoices for the receipt of income by an individual classifies them as a contractor. Although forming a portion of the framework these two assumptions do not by any means rule out the possibility that the individual is an employee in disguise.
Some factors that characterise an individual as an employee include:
Control over work â€" Does the organisation control the way the work is performed?
Work unable to be subcontracted â€" does the individual have the ability to subcontract or delegate work?
Commercial risk â€" Is the individual exempt from commercial risk? ie. is not responsible to rectify any defect in work or pay to have any defect rectified.
Independence â€" Does the individual work within the organisation or are they considered separate to it?
Equipment & tools â€" Is the individual supplied with the tools required to carry out their duties?
An organisation may choose to engage individuals as contractors to save on such things as payroll tax and work cover. Once deemed as an employee however these individuals may be eligible for all entitlements reserved for wage-earners. The organisation may be required to foot the bill for the individual's superannuation guarantee payments, PAYG tax and annual & sick leave (if applicable).
The good news is that the ATO has provided a calculator to help in determining the basis of an individual's engagement Click Here For Access
From the desk of Doug Balcam.