An independent contractor is a person who conducts their own trade or business by providing services under terms set out in a contract. But they are also known as:

  • contractors;
  • dependent contractors;
  • small business operators;
  • sole traders;
  • freelancers; or
  • entrepreneurs.

Sole traders and freelancers are individuals who provide their services as contractors to you directly. This means your contractor agreement is with the individual worker, not with a company or partnership controlled or associated with the contractor.

It’s important to note that contractors are not employees. Instead, they conduct their own trade or business, and contract with you on that basis. If you engage a contractor, you are considered the ‘principal’ in the relationship, rather than the employer.

Although contractors do not have unfair dismissal protection, they are protected in other ways under the FW Act and the Independent Contractors Act 2006 (Cth).

This includes when:

  • making superannuation contributions on the contractor’s behalf (;
  • treating contractor payments as wages for:
    • workers’ compensation; and
    • payroll tax purposes;
  • providing a safe workplace under health and safety laws; and
  • ensuring that your workplace is free of discrimination, sexual harassment, and bullying.

You are required to make superannuation guarantee contributions on a contractor’s behalf if the contract between you and the contractor is wholly or principally for labour, i.e. if more than 50% of the total value of the contract is for labour.

This will be the case if the contract between you and the worker states that the worker:

  • is remunerated (either wholly or principally) for their personal labour and skills;
  • must personally perform the contractual work and has no right of delegation; and
  • is not paid to achieve a result.

A contractor is more likely to qualify as an employee for superannuation purposes if they are paid an hourly rate rather than an amount for the completion of a task.

You will not have to make superannuation contributions for a contractor if the contract:

  • allows the worker to engage someone else to perform the contracted services, even if this right to delegate the work is not actually exercised; or
  • provides for payment of a fixed sum on satisfactory completion of the project, as opposed to an amount paid by reference to hours worked.

In both of these arrangements, the contract is not considered wholly or principally for the worker’s labour.

You should also be aware that workers compensation legislation in each State or Territory generally requires you to pay workers compensation premiums in respect of any worker. This may be the case even if your worker is classified as a contractor.


Top stories for Independent Contractors

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Foodora delivery rider an employee not a contractor

Independent Contractors

There has been substantial media coverage of the recent decision of the Fair Work Commission (FWC) in Klooger v Foodora Australia Pty Ltd (2018).

By Charles Power on December 10th, 2018

Your questions answered: Which type of insurance covers independent consultants?

Independent Contractors

Q: If you engage an independent consultant on a fixed-term contract, do we pay for WorkCover, or is it covered by their professional indemnity insurance?

By Portner Press on December 7th, 2018

Your questions answered: Are we liable for a consultant’s employee if they use our premises?

Independent Contractors

Q: If we were to tell the consultant and her PA they could no longer use our premises due to a seating shortage, would there be any risk to us?

By Portner Press on October 5th, 2018

8 differences between contractors and employees

Independent Contractors

When is a contractor, not a contractor?

By Andrew Hobbs on December 13th, 2017

Labour-hire operator fined after paying off car debt before apprentice

Independent Contractors

FWO pursues operator over ignored compliance notice after labour-hire operator fails to pay fine for paying off car debt before apprentice

By Portner Press on September 11th, 2017

Uber driver loses damages claim for $500,000

Independent Contractors

Uber driver denies driving while fatigued but photographed asleep on security job - loses damages claim for $500,000

By Jeff Salton on December 21st, 2016

Poultry processor ‘polices’ its contractors to boost compliance

Independent Contractors

Baiada adopts “moral and ethical” responsibility to eliminate the exploitation of vulnerable workers by contractors at its sites

By Jeff Salton on November 28th, 2016

‘Take it or leave it’ contracts in the spotlight

Independent Contractors

Beware rule changes if you engage independent contractors. ‘Take it or leave it’ contracts are now in the spotlight

By Charles Power on November 16th, 2016

Fundraising company agrees to back-pay $770,000 to workers

Independent Contractors

Charities to come under FWO microscope after fundraising company agrees to back-pay $770,000 to employees

By Jeff Salton on October 26th, 2016

A cautionary tale – IT contractors may not be what they seem

Independent Contractors

Why it’s important to know the differences between casual workers and contractors

By Charles Power on October 10th, 2016