Hiring contractors, freelancers or consultants

The terms contractor, freelancer, and consultant are often used interchangeably. Although the type of service they deliver can vary, there are legal obligations you must comply with when you use their services.

On this page

Understanding the terms

Contractors, also known as independent contractors, run their own businesses and are engaged under a contract for service. They are also often referred to as subcontractors.

Freelancers are also independent contractors. The term usually refers to individuals in the creative industries, like photographers or copywriters.

A consultant can work as an independent contractor, or as an employee for a company.

What services you can expect

Contractors

Contractors (including freelancers) are usually paid to perform a service or deliver an output. This could be a one-off or ongoing service.

Consultants

Consultants (whether as contractors or as employees in a company) usually work in specialist industries, such as business planning or marketing. They give expert advice and recommendations but do not generally carry out the work to put these recommendations into practice.

The difference between contractors and employees

Consider professional advice

Before engaging a contractor, consider working with an employment lawyer or human resources professional to make sure you understand your responsibilities.

It's very important to understand the difference between an employee and a contractor. If a business misrepresents an employee relationship as a contractor relationship, they could receive fines that can add up to thousands of dollars in penalties.

It's not always easy to distinguish between these relationships. There will be unique factors for each case and the true nature of the relationship will need to be considered on a case-by-case basis. Some factors may include:

  • the intention of the parties involved
  • the level of control the business has over the work being done
  • tax, super and leave entitlements
  • processes and methods used to complete the work
  • resources and tools used to complete the job
  • work delegation rights
  • the risks to the worker – financial and commercial.

Read more about the differences between a contractor and an employee.

Checklist: Engaging an independent contractor

Tick off these actions before engaging an independent contractor.

Also consider...