The Benefits of Working as a Contractor Rather than Employee

Oct 14, 2019
Reading Time: 2 minutes
Written by Shrishti Shah

Working on a contractual basis has its benefits, with one of them being that it provides more flexibility over your working conditions. This article will look into the benefits of working as a contractor, and how this compares to being an employee.

Definitions: Employee v Contractor

Definition of an employee

An employee is a part of a company once they sign an Employment Agreement. Further, employees agree to provide a service to a company and by doing so they sign into a legally binding relationship with their employer.

There are specific expectations and responsibilities that the employee has to fulfil. The main aspects of this are that they:

  • Work for a specified number of hours
  • Have limited control over how they work because they strictly follow their employer’s instructions
  • They have continuous work

Definition of a contractor

While contractors may work for a company, they only cover specific tasks. These tasks are specified in a Contractor Agreement. This allows the purpose of the contractor’s role to become more clear. However, unlike an employee, a contractor is considered external to the company.

What are the main benefits?

Ultimately, contractors work for themselves. As a result, they receive a lot more freedom to dictate their working conditions. The Independent Contractors Act 2006 (Cth) and the Fair Work Act 2009 (Cth) protect the entitlements of contractors. The main benefits contractors receive are that they:

  • Have greater control over how the work is done
  • May accept and refuse jobs as they see fit
  • Can negotiate around working hours
  • Have the discretion to choose how they spend their hours

Contractors work for themselves. Therefore, before entering into an agreement, they should obtain an ABN. Further, in some situations, they may be entitled to superannuation payments. Businesses also find that hiring contractors can be very useful. It can be useful when they have one specific task they need completed and employing a specialist would be too costly.

Contractor v Employee

Being an contractor allows the individual to retain more freedom to dictate their working conditions. However, contractors are obliged to meet certain legal requirements like acquiring an ABN and paying their own taxes. If you’re unsure about your legal rights as a contractor, it may be wise to consult a business lawyer.

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