Contractors VS Employees: Who To Choose?

For a lot of employers in the industrial sector, labour hire is one of the key concerns to be considered before kicking off the project. The choice between employees or independent contractors is an important one, as it can affect both the way that work is allocated as well as the technicalities e.g. payroll and taxation.

So what are the primary points to look at, and how do you know which type of worker suits the needs of your business?

So what’s the real difference?

There’s a list of characteristics that differentiate between an employee and an independent contractor, and it’s important to make yourself aware of these distinctions when making your decision.

Fair Work Inspectors have identified the common indicators that distinguish the two. These include:

• Hours of work
• Way they are paid
• Degree of control over the work
• Provision of tools and leave entitlement

Ordinarily, an employee will work a set amount of hours, tools will be be provided by you and they will receive a regular pay cheque as well as being provided with a specific amount of annual leave. Contractors, however, work an agreed number of hours for a set length of time, and will often use their own tools, being paid via an invoice with no entitlement to leave.

One of the most important differences for employers to be aware of is the different tax requirements of the two types of workers. The Australian Tax Office says that when paying an employee, you need to withhold tax from their wages, manage fringe benefit tax, and pay superannuation on a minimum of a quarterly basis. Contractors, meanwhile, are responsible for overseeing their own tax, but usually still require superannuation payments.

Assessing the best move for your business

The Australian Industry Group points out that when deciding on the type of labourer to recruit, it is essential to maintain a level of flexibility, as this will help you to adapt to the demands of the changing industry.

A significant factor in the employee VS contractor question is the duration for which you want to employ people. Are you undertaking short, one-off projects where it would be beneficial to engage temporary labour hire, or does your company rely on having strong on-going teamwork that can only be cultivated through long term labour jobs?

Whether it’s temp or permanent roles you’re in need have, Dragon Labour Hire can assist. We work closely with you to understand your unique construction requirements to get the right guys when you need them most.