Employee or Contractor?

Bookkeeping Services

As our clientele grew so did our administration duties and it does not make sense for a business owner to be spending the time doing the tedious administration tasks. So that is when you need to learn to delegate and decide to hire someone.

Entrepreneurs should hire people as needed. The quality of your products and services might suffer if your company is undermanned and overworking is counter-productive.

Businesses have the option to hire employees, contractors, or both. To correctly work out whether a worker is an employee or contractor, you need to look at the whole working arrangement and the specific terms and conditions under which the work is done. Once you know the difference then you can decide what is best for you.

What is an Employee?

  • An employee works mostly full time/part-time/casual for the company and the hours are generally standard or set hours (note: a casual employee’s hours may vary from week to week). 
  • The company trains and provides tools for the employees in order for them to perform their job.
  • Taxes & Superannuation are paid by the employer  
  • The company has the responsibility to train their employees 
  • Hiring and firing an employee has to be documented and legally compliant for the benefit of both employee and employer.
  • Employees can’t subcontract/delegate the work – they can’t pay someone else to do the work. 
  • Employees are paid regularly (for example, weekly/fortnightly/monthly). 
  • Employees are Entitled to receive paid leave (for example, annual leave, personal/carers’ leave, long service leave) or receive a loading in lieu of leave entitlements in the case of casual employees.

What is a contractor?

  • A contractor is a trained professional who usually specialises in one trade.
  •  They are independent workers who come with their own tools 
  • They pay their own taxes and superannuation and train on their own account.
  • Contractors work on their own time and are paid for a job done. 
  • Having or quoting an ABN makes no difference to whether a worker is an employee or contractor for a job. Businesses sometimes request or pressure a worker who is an employee to obtain an ABN in the belief this will make the worker a contractor. Often these businesses attempt to disguise the employment arrangement and make it look like contracting to avoid their PAYG withholding and super obligations. So don’t assume that having an ABN makes you a contractor. 

Benefits of Hiring an Employee

  • Employees have lower pay rates.
  • Employees work for one employer generally and are dedicated to that company only

Benefits of Hiring a Contractor

  • Contractors are trained and ready for highly specialised fields  
  • Contractors have their own tools needed to accomplish the job.
  •  Employers do not need to pay taxes or super
  •  It is easier to hire and fire a contractor. 
  • The contractor takes commercial risks, and is responsible for their work and also liable for the cost of rectifying any defect in their work.
  • Has obtained an ABN and submits an invoice for work completed or is paid at the end of the contract or project.

So consider overall benefits of both types of persons for the job and decide which one will suit you best (employee or a contractor). For help recruiting staff and with payroll processing of your current staff contact our team today at Best Bookkeepers Australia

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: