Outlining job descriptions & contractor vs employee

When you hire help in your business, it’s important to outline whether your hired help is an employee or a contractor. While the work the person achieves within your business may be identical, your responsibilities to the worker will vary regarding tax, superannuation, insurance, and other obligations. There are penalties involved if you get the distinction between employee and contractor wrong, so let’s start out by defining the two types of workers.

An Employee:

  • Ability to subcontract/delegate – they cannot pay someone else to complete the work.
  • Payment – The worker is paid either
    • For the time worked
    • A price per item or activity
    • A commission
  • Equipment and tools – your business provides most/all of the equipment, tools, and materials required to complete the task. Or, if the worker supplies tools etc, your business will reimburse or pay an allowance to the worker.
  • Commercial risks – the worker takes no risk. Your business is legally responsible for the work and is liable for any rectifications for defective work.
  • Control over work – your business has the right to direct how the work is completed by the worker.
  • Independence – the worker is not working independent of your business. They work within  and are considered part of the business.

Workers who are always employees:

  • Apprentices
  • Trainees
  • Labourers
  • Trade assistants

Employment basis:

  • Casual – hours are irregular/not guaranteed, the employee is offered work when the business needs them, the employee can choose whether or not to accept the work, and the employee is paid a casual loading (higher rate of pay for being casual)
  • Part-time – work less than 38 hours per week, hours are usually regular, usually employed on a permanent or fixed-term basis, receive the same minimum entitlements as full-time employees (sick leave, annual leave etc) but on a pro rata basis
  • Full-time – usually work an average of 38 hours per week, are employed on a fixed term or permanent basis, entitled to annual, sick and carer’s leave, entitled to written notice (or payment in lieu) when their employment ends, actual work hours are agreed between the employer and employee and may also be set out by an award or registered agreement eg Enterprise Bargain Agreement (EBA).

A Contractor

  • Ability to subcontract/delegate – the contractor can pay someone else to do the work.
  • Payment – The contractor is paid for a result based on the quote they provide. The quote can be calculated as an hourly rate, or per item.
  • Equipment and tools – the contractor supplies most/all of the equipment, tools and materials required to complete the task. Special items/materials/equipment hire etc should be included in the quote as above.
  • Commercial risks – the worker takes commercial risk, is legally responsible for their work, and liable for any rectifications to defective work.
  • Control over work – the worker has freedom in the way the work is completed, subject to terms in the contract or agreement.
  • Independence – the worker is operating separately and independently of your business. They perform the services as specified in their contract/agreement and are free to accept or reject additional work.

Workers who are always contractors:

  • Companies
  • Trusts
  • Partnerships
  • Labour hire firm (also called recruitment services or group training organisations)
  • Individuals with whom your business has a contractor agreement (written or verbal)

An employee will always be a person, so if you have hired a company, or have an agreement with a labour hire firm etc, they are contractors for the purposes of your business’ tax and super. The people who do the work on behalf of the business you have an agreement with may be employees, but they are not your employees.

Outlining the job description

A job description is a document that defines duties and responsibilities, required skills, the employment basis, pay rates etc for a specific role within your business. Taking time to write a proper job description will help you attract and hire the right person for the job, and can help you measure employee performance. Your job descriptions are going to vary depending on your business and the task requirements, however, here is what to include:

  • Job title – neatly summarising the position
  • Duties and responsibilities – clearly explains the tasks included in the specific role
  • Type of employment – casual, part-time, full-time, fixed-term, shift workers
  • General skills – these are general competencies such as ‘strong communication’ or ‘teamwork’
  • Specialised skills/experience – any special skills, experience, licences, qualifications etc required to complete the work outlined within the job description
  • Location – details about where your candidate is required to work from, any travel involved, and work from home flexibility
  • Weekly work hours and days
  • Remuneration – wages, salary, commissions etc
  • Who the candidate will report to
  • A brief background of your business
  • Any physical requirements

To hire a contractor, rather than employee, to complete a project you will need to detail:

  • Scope of work – define the desired outcome, responsibilities etc
  • Your budget – how much do you have to spend on this project
  • Your timeline/deadline – when should the project be finished by
  • Skills/Qualifications/Requirements – what skills, experience, licences etc does your ideal contractor need to complete your job? Consider any council or governing body guidelines/standards as well such as building approvals, privacy requirements, insurances etc

Some negotiation might be needed between your business and the contractor regarding budget, timeline, and expectations but it’s important to get a clear agreement in place before any work begins.