Independent contractors operate their own business and provide services under a contract for services, distinct from employees.
Legislation: Independent Contractors Act 2006; Fair Work Act 2009 | Category: Employment Types
What is Independent Contractors?
Independent contractors are workers who operate their own business and provide services to clients under a contract for services, rather than being employed under a contract of employment. The distinction is critical because independent contractors are generally not entitled to employee entitlements such as leave, minimum wage, superannuation (in most cases), and unfair dismissal protection.
From August 2024, the Fair Work Act includes a new definition for determining whether a worker is an employee or contractor, focusing on the real substance, practical reality, and true nature of the relationship rather than just the contractual terms.
Key Compliance Points for Employers
- Sham contracting (describing an employee as a contractor) carries significant penalties
- Factors indicating employment include control over how work is done, integration into the business, exclusivity, provision of tools, and inability to delegate
- Contractors may still be entitled to superannuation if working primarily for labour under contract
- Recent reforms have created an opt-in pathway for gig workers to access minimum standards
- The ATO may deem a contractor to be an employee for tax purposes regardless of contractual terms
Frequently Asked Questions
What is Independent Contractors?
Independent contractors operate their own business and provide services under a contract for services, distinct from employees.
Why is Independent Contractors important for employers?
Understanding independent contractors helps employers comply with Australian employment law, avoid penalties, and maintain fair workplace practices.
