Independent contractors

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On 26 August 2024, new laws commenced which changed the definitions of employee and employer, providing more protections for independent contractors. If you are an independent contractor, you are not a regular employee; you are your own boss and therefore have different rights and responsibilities. This page will help you understand the new laws, what it means to be an independent contractor and what your legal rights are.

What is the difference between an independent contractor and an employee?

Whether someone is an independent contractor or an employee will depend on how their work is performed, and what type of working relationship the person has with the ‘boss’. The Fair Work Ombudsman talks about this as the ‘whole of relationship test’. This means that while the contract might say that a person is an independent contractor, the actual way that person works might make them an employee.

Check out the ‘whole of relationship test’ page from the Fair Work Ombudsman to help you figure out if you are an independent contractor or employee. If you’re still unsure, you can contact us here for free legal advice.

Am I an independent contractor if my contract says that I am?

Not necessarily. Although your contract is certainly a relevant factor to take into account, it is not the only relevant factor. An employer might tell you that you need to have an ABN, or that you have to invoice them to be paid, but in every other way they treat you like an employee. For example, they might tell you what you have to wear, when you have to work and how much you will be paid. If they tell you that you are an independent contractor when you are really an employee, this might be a ‘sham contract’. See our page on sham contracting for more information.

An employer cannot tell an employee they are an independent contractor if they are not, unless they ‘reasonably believed’ that they were an independent contractor.

What are my working rights as an independent contractor?

Independent contractors have different rights and obligations to employees. This is because they provide services to another person or business rather than being employed by that person or business. In that way, they are their own ‘boss’.

Minimum entitlements

Independent contractors don’t get the same entitlements that employees get such as a minimum wage, maximum weekly hours, leave and notice of termination unless they negotiate for these to be part of their contract.

However, as of 26 August 2024 independent contractors can apply to the Fair Work Commission if they think a term in their contract (like the pay rate) is unfair. See unfair contract terms below for more information.

Tax and superannuation

Independent contractors need to pay their own income tax on the money they earn. They may also need to make their own superannuation contributions.

Safe workplace

Independent contractors are still entitled to a safe workplace. For example, you might be a builder doing building works in a public school. The school must still provide you with a safe workplace while you are there. As an independent contractor, you are also responsible for your own safety and anyone you employ. For more information on workplace health and safety for contractors in NSW see SafeWork NSW: Contractors & labour hire.

Unfair contract terms

As of 26 August 2024, contractors can apply to the Fair Work Commission if they think part of their contract is unfair in one or more of the following areas:

• Pay or allowances
• Leave entitlements
• Hours of work
• The way a contract is made or terminated
• Industrial action (like union strikes)
• Disputes processes

The Commission will consider things like whether there was a power imbalance between the contractor and the ‘boss’ when the contract was made and whether the contract term is particularly harsh or unjust.

The Commission can only hear matters relating to contracts made on or after 26 August 2024. For more information see Independent contractor disputes about unfair contract terms.

Other protections at work

Independent contractors are also protected from:

• adverse action – for example, being treated unfairly because of your age or gender
• coercion – this means being forced to do something you don’t want to do
• abuses of freedom of association – for example, being treated unfairly because you are a union member.

For more information on these rights and obligations see Contractor entitlements and support.

SPOTLIGHT: Independent contractors in the building industry

Over 20% of workers in the construction industry work as independent contractors, the highest number out of any industry in Australia. Most of these workers are tradies like plumbers, chippies and sparkies. In this industry, they’re often known as subcontractors, or ‘subbies’.

If you work in this industry, you may notice that many workers are subcontractors, have ABNs, and are hired for short-term jobs. Even though these practices are common, it doesn’t mean you will always have to work as an independent contractor if you work in construction. See ‘Myths and facts’ from the ATO for other common myths which are often seen in the construction industry.

If you work in this industry and are unsure if you’re an employee or independent contractor us here for free advice.

Where can I get further help?

For further information and advice about independent contractors, including your rights, entitlements and obligations, visit the Fair Work Ombudsman website or call the Fair Work Infoline on 13 13 94 (8.00am – 5.30pm, Monday to Friday).

If you are under 25 and need assistance, or if you have a question that hasn't been answered here, please contact us here for free legal advice.