Employee vs Subcontractor: What's the Difference for Trade Businesses?
Employees and subcontractors can sometimes look very similar on a job site.
Both might arrive in work boots at 7am. Both might carry tools. Both might perform the same trade. Both might even work beside each other on the same project.
Legally and commercially, however, the arrangements can be very different.
An employee works as part of your business under an employment relationship. A genuine subcontractor operates their own business and provides services to yours under a commercial arrangement.
For trade businesses, understanding the difference matters because it affects wages, leave, tax, superannuation, insurance, control over the work and the amount of risk each party carries.
It is also not something an employer can decide simply by telling a worker to get an ABN.
Whether someone is genuinely an employee or contractor depends on the substance of the relationship.
What Is an Employee?
An employee performs work for your business under an employment relationship.
They might be full-time, part-time or casual.
Generally, your business has significant control over when they work, what they do and how their role fits into the wider operation.
You might roster them each morning, send them to customers, provide a company vehicle, require them to follow your procedures and expect them to personally perform the work.
Employees are generally paid wages through payroll.
Their employer usually manages PAYG withholding, superannuation and employee entitlements.
Depending on their employment type and applicable industrial instrument, employees may also receive entitlements such as annual leave, personal leave, penalty rates, overtime and allowances.
For many trade businesses, permanent and casual employees form the core workforce.
They represent the business rather than operating an independent business of their own.
What Is a Subcontractor?
A genuine subcontractor operates independently and provides services to another business.
Instead of becoming part of your workforce as an employee, they are effectively another business you engage to complete work.
Consider a builder engaging an independent concreting company to complete a slab.
The concreter may quote the job, supply equipment, determine how the work is organised, employ their own workers and carry commercial risk if the project costs more than expected.
That arrangement looks very different from telling an individual worker:
"Turn up at our workshop every morning at 6:30, use our ute and equipment, work under our supervisor and invoice us forty hours at the end of the week."
Calling the second person a subcontractor does not necessarily make them one.
The real relationship matters.
An ABN Does Not Automatically Make Someone a Contractor
This is probably the most important misconception for small trade businesses.
A worker having an ABN does not automatically make them a subcontractor.
Neither does asking them to submit invoices.
Neither does writing "independent contractor" at the top of an agreement.
You need to consider how the arrangement actually operates.
A genuine contractor generally operates their own business.
They may have several clients.
They may negotiate their own pricing.
They may quote for particular outcomes rather than simply receiving an hourly wage.
They can often decide how the work is organised.
They may carry the financial risk associated with completing the job.
By comparison, someone who essentially works like every other employee in your company may still be an employee even if they happen to invoice through an ABN.
The paperwork needs to reflect the genuine relationship rather than trying to create one.
There Is No Single Deciding Factor
Employers sometimes search for one simple rule.
"If they supply their own tools, they're a contractor."
"If they invoice us, they're a contractor."
"If they only work here occasionally, they're a contractor."
"If they have another client, they're definitely a contractor."
It is rarely that straightforward.
Australian workplace law looks at multiple factors when determining the nature of a working relationship.
Depending on the business and circumstances, relevant factors can include control over how work is performed, financial risk, who provides tools and equipment, whether work can be delegated, how working hours are established and whether there is an expectation of continuing work.
No single factor necessarily decides the result.
You need to look at the relationship as a whole.
Control Is an Important Difference
Consider how much control your business has over the worker.
An employee will often be told where to work, when to start, which customers to attend and what tasks need to be completed.
A service electrician might receive jobs through the company's scheduling system, drive a company vehicle, wear company branding and follow the company's procedures.
That strongly resembles someone operating inside the employer's business.
A genuine subcontractor is more likely to have greater control over how they provide their service.
You might engage a fabrication company to manufacture ten platforms according to specified drawings by a particular date.
You care about the agreed result.
The contractor determines how they organise their resources to deliver it.
Control alone does not determine status, but it is an important part of the picture.
Look at Financial Risk
Contractors generally carry more commercial risk than employees.
An employee is usually paid for the work they perform.
If a project takes longer than expected, they generally continue receiving wages for their hours.
A genuine contractor may quote a fixed amount for the completed job.
If they underestimate the labour required, they may earn less profit.
If they complete it efficiently, their margin may improve.
They might also carry responsibility for correcting defective work under the contract.
That is business risk.
Think about who can actually make a profit or loss from the arrangement.
If the worker simply sends you an invoice every Friday for exactly forty hours at an agreed hourly rate and carries little financial risk beyond turning up, the relationship can look more employee-like.
Again, the entire relationship needs to be considered.
Tools and Equipment Can Be Relevant
Who provides the equipment necessary to perform the job?
Employees commonly use tools, vehicles, machinery and specialist equipment provided by their employer.
That is not universal.
Many employed tradespeople supply some of their own hand tools.
Likewise, contractors do not necessarily need to own every piece of equipment they use.
But a genuine contracting business will often make a significant investment in its own tools and equipment.
A subcontract plumbing business might arrive with its own vehicle, tools and equipment.
A fabrication contractor may operate from its own workshop.
A plant contractor may supply machinery as part of the service.
Compare that with an individual who arrives each day and uses your vehicle, your tools, your consumables and your systems.
That distinction contributes to the overall assessment.
Can the Worker Delegate the Job?
Another useful question is whether the person has to perform the work personally.
Employees generally cannot decide:
"I'm busy today, so my mate Steve is going to work my shift."
The employee has been hired personally to perform their role.
A genuine contractor may have a greater ability to subcontract or delegate the work depending on the commercial agreement.
For example, you may engage a contracting company rather than one particular electrician.
That company could send one of several suitably qualified employees to complete the service.
The business is responsible for delivering the contracted result.
This ability to delegate work can point toward an independent business relationship.
If you are hiring a particular individual's personal labour and they are not permitted to send anyone else, that can point more toward employment, although other factors still matter.
Working Hours Can Tell You Something
Employees commonly operate according to hours established by their employer.
Monday to Friday.
6:30am start.
Thirty-minute lunch break.
Finish at 3pm.
Overtime when required.
A contractor may have greater flexibility over when and how work is performed, subject to the requirements of the job.
Construction complicates this slightly because contractors may still need to work within site hours or coordinate with other trades.
The mere fact that a contractor needs to arrive during approved site hours does not automatically make them an employee.
The question is how the working relationship functions overall.
If the business essentially rosters the worker like one of its employees indefinitely, that is worth looking at more carefully.
Consider Whether the Worker Is Running Their Own Business
One of the most practical questions is:
Does this person genuinely appear to be running a business of their own?
A contractor might advertise their services.
Have several customers.
Provide quotes.
Carry business insurance.
Own equipment.
Employ or subcontract other workers.
Maintain their own business systems.
Negotiate commercial terms.
Bear the risk of poor quoting or defective work.
The more the worker resembles an independent enterprise providing services to your business, the stronger the contracting characteristics become.
Now compare that with a worker who effectively works exclusively within your business, follows your roster, uses your equipment, receives an hourly rate and has little ability to determine how work is delivered.
That arrangement may look much more like employment.
The Length of the Job Does Not Decide It
Another common assumption is that short-term workers should be contractors.
That is incorrect.
Employees can be engaged for short periods.
You can have casual employees.
Temporary employees.
Fixed-term employees in appropriate circumstances.
Employees engaged during busy periods.
Likewise, contractors can sometimes work with the same client for long periods.
Duration by itself does not determine the relationship.
Suppose you need another fitter for a two-week shutdown.
You could potentially engage a genuine contracting business.
You could also employ a casual fitter for those two weeks.
The correct arrangement depends on how the work is actually structured rather than simply how long you need someone.
Payment Method Does Not Decide It Either
Employees are commonly paid hourly wages.
Contractors may invoice hourly, daily, by project or according to another agreed commercial structure.
Being paid through an invoice does not automatically establish contracting.
Likewise, paying someone an hourly rate does not automatically make them an employee.
However, payment structure can contribute to the overall picture.
A contractor who quotes $15,000 to complete an installation and must manage their own labour and materials looks commercially different from an individual sending your business an invoice for thirty-eight hours every week.
Look at what is really being purchased.
Are you purchasing a result from another business?
Or are you purchasing the ongoing personal labour of one worker inside your business?
Employees Usually Receive Employment Entitlements
Employees generally receive minimum workplace entitlements under the Fair Work system.
The exact entitlements depend on whether they are permanent or casual and whether an award, enterprise agreement or other instrument applies.
Permanent employees generally receive paid annual leave and personal/carer's leave.
Casual employees generally receive a casual loading rather than those particular paid leave entitlements.
Employees can also have rights relating to minimum wages, overtime, penalty rates, allowances, public holidays, notice and other workplace protections.
Contractors are not automatically entitled to the same employee conditions because they are operating under a commercial arrangement rather than an employment relationship.
Their rate should therefore account for the costs and risks of running their business.
That is one reason comparing an employee's wage directly with a contractor's invoice rate can be misleading.
Contractors Are Not Necessarily Cheaper
Some trade businesses assume contracting is a cheaper way to obtain labour.
It may or may not be.
A genuine subcontractor will normally price their service to cover much more than personal wages.
They may need to cover:
Insurance.
Vehicles.
Tools.
Administration.
Downtime.
Leave.
Accounting.
Training.
Business profit.
Commercial risk.
GST where applicable.
A qualified employee might cost the employer $45 per hour in wages plus employment on-costs.
A genuine subcontractor may quote considerably more per hour because their rate needs to cover an entire business.
The contractor can still be commercially attractive.
Perhaps you only need them for two weeks.
Maybe they bring specialist equipment.
Perhaps they can deliver an entire scope of work without requiring your supervision.
The value is flexibility and capability, not necessarily a cheaper hourly rate.
Superannuation Can Still Apply to Some Contractors
This is another area where employers need to be careful.
Assuming "they have an ABN, so we don't pay super" can be wrong.
The tax rules can treat some contractors as employees for superannuation guarantee purposes where the contract is principally for that person's labour.
Broadly, this can arise where the arrangement is mainly for their personal labour and skills, they are paid to perform the work personally and they cannot delegate the work.
That means someone can be treated as an independent contractor in one context while your business can still have a superannuation obligation.
Trade businesses relying heavily on individual contractors should pay particular attention to this.
If you are unsure whether super applies, get the arrangement checked rather than making assumptions based on invoices.
Tax Works Differently Too
Employees are generally paid through payroll, with the employer withholding PAYG tax from their wages and reporting the employment income.
A genuine independent contractor generally manages their own tax obligations through their business.
They may invoice your company and manage income tax, GST and other business obligations themselves.
But again, simply receiving an invoice does not determine worker classification.
If someone is actually your employee, putting their wages through an invoice does not automatically remove your payroll obligations.
Businesses also need to be aware of reporting obligations that can apply to payments made to contractors in certain industries.
Good bookkeeping does not fix an incorrectly structured relationship.
Classification needs to come first.
Workers' Compensation and Insurance Need Attention
Insurance is another reason the distinction matters.
Employees will generally need to be covered by the applicable workers' compensation arrangements.
A genuine subcontractor may carry their own business insurances, such as public liability and other relevant cover.
However, workers' compensation laws differ between states and territories, and some contractors can still be treated as workers for particular purposes.
Do not assume that obtaining a certificate of currency from a subcontractor automatically eliminates every responsibility.
Trade businesses should understand the workers' compensation requirements applying in the jurisdiction where they operate.
This becomes particularly important for construction businesses using large subcontractor networks.
Licensing Still Applies
Being a subcontractor does not override trade licensing rules.
A contractor still needs whatever licences, registrations or competencies are required for the work they perform.
If you subcontract regulated electrical work, the contracting business and workers may need relevant electrical licences.
The same applies to plumbing, gas work and other regulated activities.
High-risk work requirements still apply.
Site safety rules still apply.
Construction induction requirements still apply.
Do not confuse business structure with technical authority.
"He's a subcontractor" does not mean:
"He's responsible for everything, so I don't need to check."
Your business should still make sure the people being brought onto jobs are appropriately qualified for the work they will perform.
Sham Contracting Is a Serious Risk
Sham contracting occurs where an employer tells or represents to a worker that they are an independent contractor when they are actually an employee and the business does not reasonably believe they are genuinely a contractor.
It can be used to try to avoid employee entitlements such as leave, superannuation and other employment obligations.
It is illegal.
A particularly obvious example would be dismissing an employee and then telling them they can continue doing essentially the same job only if they obtain an ABN and become a contractor.
Trade businesses should be especially cautious because contracting is common across construction and related industries.
An arrangement appearing normal within an industry does not necessarily mean it is legally correct.
If the relationship operates like employment, simply following what another contractor down the road does will not protect your business.
Fair Work Looks at the Real Relationship
For many national-system businesses, current Fair Work rules use a whole-of-relationship approach when determining whether someone is an employee or contractor.
This means considering the real substance, practical reality and true nature of the relationship.
The written agreement still matters.
So does what actually happens.
If the contract says the worker controls their own hours, but in reality your supervisor rosters them from 7am to 3pm every weekday, that discrepancy could become relevant.
Likewise, if a contract says a contractor can delegate work but the business never allows anyone except that specific person onto the job, the reality may not match the paperwork.
This is why employers should avoid downloading a generic "subcontractor agreement" and assuming it solves the problem.
The agreement and actual arrangement should make sense together.
When Employees Make More Sense
Employees usually make sense where the person is genuinely joining your workforce.
Perhaps you need another plumber indefinitely.
You will provide the vehicle.
Allocate customers.
Set the roster.
Train them in your systems.
Supply much of the equipment.
Expect them to represent your brand.
Supervise apprentices.
Attend team meetings.
Work consistently each week.
That looks naturally suited to employment.
The employee becomes part of your business rather than operating their own business alongside yours.
Employment also makes workforce planning easier.
You know who is available.
You can build consistent teams.
Training investments are easier to justify.
Customers see familiar people.
Apprentices receive stable supervision.
For core ongoing positions, employing people directly often makes operational sense.
When Subcontractors Make More Sense
Subcontractors can be excellent where you genuinely need another business to provide a defined service.
A builder might subcontract the electrical package.
An electrical contractor might engage a specialist controls company.
A fabrication company might subcontract site blasting and painting.
A landscaping business might subcontract specialised excavation.
A mechanical contractor might engage another business to complete machining it cannot perform internally.
In these examples, the contractor has specialist capability and commercial independence.
They might quote the scope.
Supply workers.
Provide equipment.
Manage how the service is delivered.
Carry risk for completing the work.
That is very different from hiring an individual to effectively fill an ordinary rostered position inside your company.
Subcontracting works particularly well when the capability is specialised, project-based or not required frequently enough to justify employing it internally.
Subcontractors Can Help a Growing Trade Business Scale
Subcontractors can also help businesses manage growth.
Imagine a small electrical contractor suddenly winning several large projects.
Immediately employing ten permanent electricians might create significant risk if the projects finish and the workload disappears.
Using a combination of permanent employees and genuine subcontracting businesses can allow the company to increase capacity more gradually.
The permanent team provides the core workforce.
Subcontractors deliver defined packages or additional specialised capability.
Over time, the owner can see whether the higher demand is sustainable.
If it becomes permanent, direct employment may become more attractive.
This model can work particularly well where the business is careful not to turn supposed contractors into employees in everything except name.
Compare Employees and Contractors on Total Cost
The choice should not be made from hourly rates alone.
For an employee, consider wages, superannuation, leave, payroll administration, insurance, training, tools, vehicles and applicable allowances.
For a subcontractor, consider the invoiced rate, GST where relevant, potential super obligations, contract administration and whether the contractor genuinely supplies equipment and commercial capability that your business would otherwise need to provide.
Then consider indirect costs.
Employees require ongoing management.
Subcontractors can require coordination between businesses.
Employees provide continuity.
Contractors can provide scalability.
Employees can build internal intellectual knowledge.
Specialist subcontractors may bring expertise you could never justify employing permanently.
The cheapest option is not always the best one.
Ask what your business is actually trying to achieve.
Put Proper Agreements in Place
Whether you choose employment or subcontracting, document the arrangement properly.
Employee contracts should clearly establish employment type, role, pay and relevant conditions.
Contractor agreements should describe the commercial service being provided, payment structure, scope, responsibilities and other relevant contractual terms.
Avoid treating a contract as magic.
A document cannot simply turn an employee into a contractor.
But clear agreements help both parties understand the intended relationship and reduce disputes.
For significant subcontracting arrangements, particularly construction projects involving large sums, risk, defects or complex scope, professional contract advice can be worthwhile.
A vague text message saying "can you give us a hand next week, $60 an hour ABN" may be convenient.
It may not be a great foundation for a substantial commercial relationship.
Review Long-Term Contractor Arrangements
Relationships change.
A contractor may originally have provided occasional project work.
Two years later, they might be working exclusively for your company every week.
Perhaps you now dictate their hours.
They use your vehicle.
They no longer quote jobs.
They simply invoice the same hours each Friday.
The arrangement may have evolved substantially from what was originally intended.
That does not automatically determine their legal status.
It should trigger a review.
Look at long-running contractor arrangements periodically.
Ask whether the practical relationship still matches the agreement and whether contracting remains the most appropriate structure.
It is much easier to address uncertainty proactively than after a dispute begins.
A Simple Example
Imagine two qualified electricians working for the same builder.
Electrician A is employed by the builder.
The builder sets their hours, supplies the vehicle and major equipment, allocates jobs, pays an hourly wage and requires Electrician A personally to attend each day.
Electrician B owns Bright Spark Electrical Pty Ltd.
The builder engages Bright Spark to complete the electrical scope on a townhouse project for an agreed contract price.
Bright Spark supplies its own equipment, decides which of its electricians attend, manages its labour and carries commercial responsibility for completing the agreed scope.
Both people are electricians.
Both may spend time on the same construction site.
But the commercial relationships look completely different.
That is the distinction trade businesses should focus on.
A Quick Employer Checklist
Before engaging someone as a subcontractor, ask yourself:
- Are they genuinely operating their own business?
- Who controls how the work is performed?
- Who carries financial risk?
- Who provides the main tools and equipment?
- Can they delegate or subcontract the work?
- Are you paying for a defined result or mainly for the person's labour?
- Do they work with multiple clients?
- Are their hours genuinely controlled by them or by your business?
- Will the arrangement actually operate the way the written contract says?
- Could superannuation still be payable?
- Does the arrangement look like contracting in reality, or employment with invoices?
One answer will not determine the outcome.
The checklist is designed to make you examine the relationship properly.
If the answers are unclear, professional advice can be much cheaper than correcting years of misclassification later.
Employee, Casual Employee or Contractor?
Sometimes employers incorrectly think the only options are permanent employee or contractor.
There is another obvious option.
Casual employment.
If your reason for wanting a contractor is simply:
"I don't know whether we'll have enough work next month,"
you may not need a contractor at all.
A genuine casual employment arrangement may provide the flexibility you need while correctly treating the person as an employee.
Likewise, a fixed-term employment arrangement can sometimes be appropriate for genuinely time-limited work, subject to the rules applying to fixed-term contracts.
Choose the structure based on the real working arrangement.
Do not force contracting simply because the job is temporary.
Where Tradie Jobs Fits In
Tradie Jobs focuses on Australian trade and blue-collar employment across electrical, plumbing, automotive, carpentry, HVAC and refrigeration, fitting, welding, boilermaking, landscaping, scaffolding, traffic control, labouring, FIFO and mining.
When advertising a vacancy, be clear about the arrangement you are actually offering.
If it is employment, state whether the role is full-time, part-time or casual.
If you are genuinely looking for subcontracting businesses, make the commercial nature of the opportunity clear.
Avoid advertising what looks like an ordinary employee position with "ABN required" added at the bottom.
The stronger the job advertisement, the easier it is to attract people looking for the same arrangement your business genuinely needs.
Final Thoughts
The difference between an employee and subcontractor comes down to much more than an ABN.
Employees work within your business.
Genuine contractors operate businesses of their own and provide services to yours.
Look at the whole relationship.
Control.
Financial risk.
Tools.
Ability to delegate.
Hours.
Payment arrangements.
Whether the worker is genuinely running their own enterprise.
Whether the relationship operates in practice the way the agreement says it does.
Then consider the commercial question.
Do you need another person inside your workforce?
Or do you need another business to deliver a defined service?
If you need someone working under your direction every week, direct employment may be the cleaner and more useful arrangement.
If you need an independent business to deliver a project, specialist capability or defined scope, subcontracting may make more sense.
Get the distinction right before the person starts.
It is far easier than discovering later that your "subcontractor" should have been treated as an employee all along.
Frequently Asked Questions
What is the difference between an employee and subcontractor?
An employee works for your business under an employment relationship, while a genuine subcontractor operates independently and provides services to your business.
Is a subcontractor the same as an independent contractor?
The terms are commonly used to describe independent contracting arrangements, particularly where one business contracts part of its work to another.
Does having an ABN make someone a subcontractor?
No. Having an ABN does not automatically make a worker an independent contractor.
Does sending invoices make someone a contractor?
No. Invoicing is only one feature of an arrangement and does not determine employment status by itself.
Can a contractor be paid hourly?
Potentially. Payment method is only one factor considered when assessing the overall relationship.
Can an employee have an ABN?
A person can have an ABN for other business activities while still being an employee in a particular working relationship.
Can I ask a tradie to get an ABN instead of employing them?
You should only engage them as a contractor where the relationship is genuinely one of independent contracting.
What factors determine employee vs contractor status?
Relevant factors can include control, financial risk, tools and equipment, ability to delegate work, hours and expectations around the ongoing relationship.
Is there one test that proves someone is a contractor?
No single factor normally decides the issue. The circumstances of the relationship need to be considered together.
If someone supplies their own tools, are they a contractor?
Not necessarily. Many employed tradies provide some tools of their own.
If I provide the tools, are they definitely an employee?
Not necessarily, although who supplies equipment can be one factor considered.
Can contractors work only for one business?
Potentially, although working exclusively for one client can be relevant when looking at the broader relationship.
Do contractors choose their own hours?
Genuine contractors often have greater control over how their services are delivered, although site and project requirements can still restrict working times.
Can a subcontractor send another worker instead?
A genuine contractor may have an ability to delegate or subcontract work depending on the agreement, which can be an indicator of an independent business relationship.
Can an employee delegate their work?
Employees are generally personally engaged to perform their job and cannot simply send another person to work their shift.
Are subcontractors entitled to annual leave?
Genuine independent contractors are not generally entitled to employee annual leave from the business engaging them.
Are subcontractors entitled to sick leave?
Genuine contractors do not generally receive employee paid personal/carer's leave from their client.
Do contractors get overtime rates?
Contractor payment is generally determined by the commercial agreement rather than employee award overtime provisions, although the genuine status of the relationship must first be correct.
Do subcontractors receive superannuation?
Some contractors can still be entitled to superannuation guarantee contributions where they are paid principally for their personal labour and other requirements are met.
Does having an ABN mean I don't have to pay a contractor super?
No. An ABN does not automatically remove possible superannuation obligations.
Do employers withhold tax from subcontractors?
Genuine contractors generally manage their own tax obligations, although different withholding and reporting obligations can apply in particular situations.
Do subcontractors need insurance?
Genuine contracting businesses commonly carry appropriate business insurance, but requirements depend on the work and arrangement.
Does a contractor need workers' compensation?
Workers' compensation rules vary between jurisdictions, and some contractors can be treated as workers for certain purposes. Employers should check their local requirements.
Do subcontractors need trade licences?
Yes where the work requires licensing. Contractor status does not override occupational licensing rules.
Can I subcontract electrical work?
Potentially, provided the contracting arrangement and required electrical licensing comply with the rules applying in the relevant jurisdiction.
Can I subcontract plumbing work?
Potentially, subject to applicable licensing, business and contractual requirements.
What is sham contracting?
Sham contracting involves representing an employee as an independent contractor when the business does not reasonably believe the worker is genuinely a contractor.
Is sham contracting illegal?
Yes.
Why would a business use sham contracting?
It can be used to try to avoid employment obligations such as leave, superannuation and other employee entitlements.
Can I fire an employee and bring them back on an ABN?
Employers need to be extremely careful. Dismissing or threatening to dismiss someone in order to re-engage them as a contractor to perform the same or substantially the same work can breach sham contracting laws.
Is contracting common in construction?
Yes. Genuine subcontracting is extremely common throughout Australian building and construction.
Does that mean every worker on an ABN in construction is a contractor?
No. Industry practice does not override the true nature of the working relationship.
Can short-term workers be employees?
Yes. Employees can work short-term, temporary, casual and project-based arrangements.
Is a contractor better than a casual employee for temporary work?
Not automatically. If the worker is genuinely operating like an employee, casual employment may be more appropriate.
Are subcontractors cheaper than employees?
Not necessarily. Genuine contractors usually price their services to cover business costs, risks and profit.
When should I employ a tradie directly?
Direct employment often suits ongoing roles where you want the worker integrated into your business and working under your systems and direction.
When should I use subcontractors?
Subcontracting can suit defined projects, specialist work and situations where you genuinely want another independent business to deliver a service or outcome.
Can a small trade business use both?
Yes. Many businesses maintain a permanent employee workforce while using genuine subcontractors for specialist or project-based services.
Can a contractor become an employee later?
Yes. Businesses and workers can change the structure of their relationship where appropriate.
Should I review long-term contractor arrangements?
Yes. If the way the relationship operates changes substantially, reviewing the classification is sensible.
What if the contract says they are a contractor?
The wording of the contract matters, but it does not necessarily settle the issue where the overall relationship indicates something different.
What is the whole-of-relationship test?
For businesses to which it applies, it involves considering the real substance, practical reality and true nature of the relationship when determining employee or contractor status.
Should I get legal advice before using subcontractors?
If the classification is unclear, the arrangement is significant or the worker will operate similarly to an employee, professional advice can be worthwhile.
What is the biggest employee vs subcontractor mistake?
Assuming that an ABN, invoice or contractor agreement automatically makes someone a subcontractor without considering how the working relationship actually operates.