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.
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 (including freelancers) are usually paid to perform a service or deliver an output. This could be a one-off or ongoing service.
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.
- Read up on independent contractors and your responsibilities regarding fair work, tax, superannuation, work health and safety, and anti-discrimination.
- Use the employee/contractor decision tool by the Australian Taxation Office to work out whether your worker is an employee or contractor for tax and superannuation purposes.
- Learn more about payroll tax payments to contractors.
- Prepare a contract – ensure the contract clearly states the rights and responsibilities of everyone involved. Read how to prepare a contract or seek professional legal advice.
- Consider intellectual property (IP) – the independent contractor will own the IP of work they create during the contract, unless the contract clearly says you will own the IP. Read more about IP and contracts.
- Learn more about your legal obligations regarding contractors' rights and protections.
- Know your health and safety rights and obligations.
- Find out more about finding and hiring staff.
- Read about Workforce Australia, an Australian Government initiative helping you find the right staff for your business.
- Read about support for contractors, consultants, freelancers, sole-traders and other self-employed Queenslanders.
- Read about Australia-wide information on awards, pay rates, leave, awards, employee entitlements and hiring and termination information through the Fair Work Ombudsman.
- Learn more about anti-discrimination and equal opportunity.
- Find out more about your responsibilities when advertising and recruiting from the Queensland Human Rights Commission.
- Learn about the difference between casual, full-time and part-time.
- Read the Good people. Good jobs: Queensland Workforce Strategy 2022–2032.
- Last reviewed: 28 Sep 2022
- Last updated: 28 Sep 2022