Contractor or employee? The mistake that can cost tradies and small businesses thousands

This is one of the most expensive mistakes a growing business can make, and it's an easy one to fall into. You take someone on, call them a contractor, pay them as a contractor, and assume that's that. But it's not about what you call them. It's about how they actually work.

The test that actually matters

Here's the simple version. If someone works consistent hours for you, uses all your tools and equipment, and basically looks like a part-timer, then in the government's eyes they're an employee, no matter what you've agreed to call them. Paying them as a contractor doesn't change that.

A true contractor looks different. Think of someone renting a room or a chair from you, using their own equipment, running their own show, not on an hourly rate from you. That's a genuine contractor.

Why getting it wrong is expensive

If you've been treating an employee as a contractor and that person takes you to Fair Work, they'll win. And then you're on the hook for the superannuation you should have been paying, WorkCover, and the rest of the entitlements, often backdated. That can be a serious, unexpected bill for a business that thought it was doing the right thing.

What to do about it

If you've got someone working for you and you're not 100% sure which side of the line they fall on, get it checked before it becomes a problem. It's a quick conversation now versus a big bill later. And if you're about to take someone on for the first time, it's worth getting the setup right from day one, employee or contractor, so you're covered.

This is exactly the kind of thing we help business owners get right. If you've got someone on the books and you're not sure they're classified correctly, it's worth a chat before Fair Work or the ATO raises it for you.