How do we know if our workers are employees, contractors or volunteers?

The main differences between employees, contractors and volunteers are to do with if and how they are paid, what benefits they receive and how they approach the work.

Employees

An employee has a defined role within the organisation and work hours set by the employer, a workplace agreement or an industrial award.

  • Payment: an employee is paid for time worked and is paid weekly, fortnightly or monthly.
  • Superannuation and Tax: an employee is entitled to have contributions paid into their nominated superannuation fund by their employer. Employers also withhold income tax from the employee’s pay.
  • Insurance: an employee is not responsible for insurance. They are covered by professional indemnity, public liability and workers compensation insurance premiums paid by the employer.
  • Tools and equipment: the employer generally provides the employee with the tools and equipment they need to do their work.

Contractors

The contractor usually has an Australian Business Number (ABN) and is often operating as a registered business. They are ‘contracted’ to provide a set piece of work, or to work for a period of time on agreed tasks.

  • Payment: a contractor is normally paid for results, such as when a project, or set number of hours, has been delivered.
  • Superannuation and Tax: the contractor takes care of their own income tax payments and superannuation contributions.
  • Insurance: the contractor will generally hold their own insurance policies.
  • Tools and equipment: a contractor usually provides their own tools, and the materials and equipment required to complete the work.

Volunteers

The broadly accepted definition is that “volunteering is of benefit to the community and the volunteer, undertaken of the volunteer’s own free will, and done for no financial gain”.

  • Payment: volunteers do not receive payment for the work they do. However they can be reimbursed for expenses.
  • Superannuation and Tax: as volunteers are not paid they are not eligible for superannuation and are not subject to income tax.
  • Insurance: volunteers are not responsible for insurance. They are covered by personal accident, professional indemnity and public liability insurance premiums paid by the organisation.
  • Tools and equipment: you would generally need to provide a volunteer with the tools and equipment they need to do their work.

 

Further Information

  • your unpaid workforce is not always specifically mentioned in legislation but volunteers do have rights, expectations, and in some cases, protections.

  • the legal and compliance requirements for managing employees in your Not For Profit organisation are the same as for any employer.

  • specific laws and regulations apply to independent contractors, who are classed as self-employed or a small business operator by the tax office.

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