Understanding the difference between an employee and contractor can save you a lot of money and help you avoid disputes with your workers.
Too busy to read on? check out our 47 second summary video below.
Do you know how you have classified your worker? that is, if they an employee or a contractor? Do they know how they have been classified?
If you have a written agreement that clearly outlines your relationship with your worker then that's great. However, if not and you have a verbal arrangement that has become confusing, read on.
So how do you know if you've hired a contractor?
If you have hired a contractor it is likely that they will work on your startup this way:
If you worker meets the criteria above, you may wish to read up on our tips for hiring a contractor.
It follows then if you have not got a worker with characteristics above it is likely they are an employee. And if you've hired an employee, it is likely that you:
It's important to note that the courts will not look at one single factor. Rather, courts will look at the totality of the relationship to determine if your worker is an employee or a contractor.
If you are still unsure whether you have hired a contractor or employee, be sure to get legal advice quickly.
A lawyer may be able to help you negotiate a settlement with the incorrectly classified worker in a way that protects and stops court action against your business.
Terms of settlement or a deed of release summarise the incorrect classification issue and what will actions need to be taken to resolve it e.g. payment of annual leave, superannuation or a fixed amount of money.
Importantly, the terms will have a release clause to end the situation quickly and stop the worker from starting legal action against you including court etc.
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