Completing Your Contractor Agreement (Individual)
A contractor agreement (individual) allows a business to hire an independent contractor to perform work on a temporary basis (usually for a fixed-term). This agreement determines the rights and responsibilities of the contractor, and they should carefully read the document before commencing work. In this article, we’ll outline what you should do after completing your contractor agreement (individual) to make sure the work gets done.
1. Make sure both you and the contractor sign the agreement
The key terms within your agreement won’t be legally enforceable if the agreement isn’t signed. It’s important that work only commence once the agreement has been signed and when both you and the contractor understand all the terms. Your contractor should be aware of the expectations, responsibilities, deadlines and payment when they start the job. Further, the grounds or methods of termination should be clear to both parties.
2. Understand the difference between an employee and a contractor
There are a number of differences between an employee and a contractor, and it’s illegal to hire someone under a contract when they are in fact an employee. An employee:
- Works for a specified number of hours (e.g. full-time employees work for around 38 hours a week)
- Receives parental leave and paid leave
- Has limited control over how they work because they strictly follow employer instructions
- Receives superannuation from the employer
- Has their income tax deducted by their employee
- Receives pay regularly
By contrast, a contractor:
- Has greater control over how the work is done
- Usually has an ABN
- Is not entitled to paid leave
- Can negotiate working hours
- Bears financial risk
- Files their own taxes
- Pay their own superannuation
- Gets paid by invoices sent to the company
3. Make sure you’re not engaging in sham contracting
Sham contracting is where an employer attempts to disguise an employee as an independent contractor and is illegal under the Fair Work Act 2009 (Cth). This arrangement is sometimes undertaken by employers who wish to cut costs by avoiding employee entitlements such as paid leave. Businesses can face heavy penalties if they attempt to pass off an employee as a contractor, so it’s wise to make sure the person you’re hiring is actually being hired on a contractual basis.
Finally
A contractor agreement (individual) will set out the terms of work between a business and contractor. However, it’s important to bear in mind the distinct difference between employees and contractors and what this document means. Beyond this, both you and the contractor should both still be on the same page after completing your contractor agreement (individual). If you have further questions about hiring a contractor, it may be worth getting in touch with a business lawyer.
