"This is a grey area" is a term often heard when talking about whether someone is a contractor or employee. Most organisaitons and producers engage performers, musicians and crew as contractors, however this may not always be strictly correct.
Fortunately, there are guidelines to determine if a worker is a contractor or employee and the ATO have very useful resources to assist this process.
Avoid the myths This 1 min 40 second video dispels the common misconceptions associated with engaging a worker as a contractor and it is a great place to start.
ATO decision tool This tool takes you step by step through engaging a worker and explores the different relationships you can have with workers.
The Employee indicators resource notes employee status is determined by considering the whole working arrangement across the following:
- the worker cannot subcontract the work - they cannot pay someone else to do the work
- the worker is paid hourly for the time worked, piece work or a commission
- the worker does not provide all or most of the tools, equipment and other assets required to complete the work or they do provide all or most but receive an allowance for this
- the worker is not legally liable for the cost of rectifying any defects. The employer is responsible
- the employer has the right to direct the way in which the worker performs their work
- the worker is not operating independently from the employer's business. They work within and are considered part of the employer's business.
The Contractor indicators resource states Contractor status is determined by considering the whole working arrangement across the following:
- the worker is free to pay someone else (subcontract) to do the work
- the worker is paid for a result achieved based on the quote they provided
- the worker provides all or most of the tools, equipment and other assets required to complete the work and does not receive an allowance for this
- the worker is legally responsible for their work and liable for the cost of rectifying any defects in their work
- the worker has freedom in the way the work is done subject to the specific terms of any contract or agreement
- the worker is operating their own business independently from the employer. The worker is free to accept or refuse additional work.
In summary, contractors are responsible for managing their own tax obligations, public liability insurance and income protection. Employers are responsible for managing and paying an employees tax, superannuation and workcover.