Do you have an employee or contractor? You need to classify your workers correctly as it can affect your tax, superannuation and other obligations and you may incur penalties if you are proven wrong. An employee is someone who works in your business whereas a contractor operates his or her own business. For tax and superannuation purposes, here are some factors you should consider to determine whether or not your worker is an employee.
If an employee cannot work, he or she cannot delegate or subcontract the work or pay someone else to do it. The employer will have another staff member to cover the work. A contractor, on the other hand, can delegate and pay someone to do this work.
Contractor or employee?
If you pay a work a set amount for a set period like an award rate, hourly rate or annual salary, they are considered an employee but if you pay for an agreed result based on a quote, they are a contractor.
If your business provides equipment and tools to allow them to deliver a product or service or if your worker provides their own equipment and tools but you provide allowance or reimburse the cost, the worker is an employee. Otherwise, he is a contractor.
An employee doesn’t take commercial risk as the business is legally responsible for his or her work and liable for rectifying any defect in the work but a contractor takes commercial risks, being responsible for his or her work.
Employees also do not operate independently of the business but contractors operate their own business independently. A contractor performs services specified in your contract and can accept or refuse any additional work.
Employees are persons as well. You can hire a company, trust or partnership with a contracting relationship for tax and superannuation purposes. The people may be the contractor’s directors, partners or employees but they are not your employees.
Find out if your worker is an employee or a contractor for tax and superannuation purposes and to avoid any penalties. Talk to a tradies accountant for more details.
As you look for different ways to grow and improve your business, seeking professional advice could prove to be an important and helpful decision.
You can click here to speak to a business, accounting and bookkeeping firm. We also offer hospitality business consultation and mortgage services. We will give you a call to know more about your needs. We will explain to you how we can improve your business.
We would love to help you formulate investment strategies and streamline your processes to take your business to the next level. Our goal is to help you grow your business, find ways to invest more and increase your productivity.
Phone: 1300 328 855
Office Address: 902 Howitt Street, Wendouree, VIC 3355, Australia
Postal Address: PO Box 2234, Bakery Hill, Victoria 3354
Phone: 03 97444522
Office Address: 45 Hamilton Street, Gisborne, VIC 3437, Australia
Postal Address: PO Box 270 Gisborne Victoria 3437