Independent Contractor Agreement

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Independent Contractor Agreement

 
 

INTRODUCTION

In the early stages of starting a business you need people to help make your goals into reality. Whether it is employing people on a full time, part time or casual basis, or engaging a contractor, having new people with fresh perspectives in the business is important to help it move forward.  

An independent contractor is someone who works for themselves and who you engage to perform a specific service or project for you. By contrast, hiring employees creates an ongoing legal relationship with more onerous obligations for employers. Employees become part of your company and work on a continuing basis for an agreed salary and have certain expectations.  

 

WHAT DOES IT COVER?

If you choose to engage an individual or another company as an independent contractor you will need an Independent Contractor Agreement. Having a well-written Independent Contractor Agreement will protect you from potential disputes over employment status, what work is to be performed and delivered and allow you to hold the contractor accountable to the work they are performing. The agreement forms the basis of the relationship between you and the contractor and outlines both your obligations and responsibilities.  

 

WHY IS THIS IMPORTANT?

Whether you hire employees or independent contractors is an important decision because it will determine your obligations, for example in terms of tax and superannuation. Independent contractors pay tax independently and make their own superannuation contributions, whereas an employer is required to deduct taxes and make superannuation contributions on behalf of an employee

It is important to note that you cannot disguise an employment arrangement to be an independent contractor arrangement. Whilst it might be cheaper, easier and better suited to both parties, “sham contracting” can have substantial and significant legal consequences for both the company and you as a director. Any contracting arrangement must actually be a contract for services, not employment, in order to come within the confines of Australian employment law. 


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