Should your business employ workers or contractors? That is the question posed to many

Photo: vervegroup.com.au

Photo: vervegroup.com.au

Australian businesses today. And there are benefits and drawbacks to each.

For employers the attraction of a contractor is clear: there are significant tax breaks (depending on their income and current tax rate) and significant streamlining of paperwork and accounting.

Contractors do not receive holiday pay, long service leave, superannuation or workers’ compensation from their employers, while employees do.

However, business owners have significantly less control over contractors. So long as the work complies with the terms of the contract between them, the contractor is free to do the work as he or she desires.

Furthermore, contractors are not bound to up-sell their employer’s good and services, protect their brand or reputation, nor even pass on any information that may be of service to them. Each of which forms a large part of increasing business margins.

Employers can avoid difficult unfair dismissal laws through contracting for short periods of time. However, this also leaves them vulnerable to the contractor refusing work no matter how urgently the employer needs it done.

And while a contractor is legally responsible for the work they do – thus removing the employer from potential litigation and conflicts of interest; any savvy contractor will build the necessary indemnities into their price.

As in all business, it all comes down to trust. The employer and contractor or the employer and worker need to trust each other if any of them are to flourish. Any one of them attempting to undermine or rip off any other will be to the detriment of all.

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