What is the difference between an employee and an independent contractor and why should I care?

Posted on July 06, 2023

An employee and an independent contractor have different rights and obligations. This is why it is important to understand the difference between the two.

Employees work in and are part of your business, performing their work as a representative of your business. Independent contractors are running their own business and may provide services to your business. Independent contractors are also called contractors or subcontractors.

To work out if your worker is an employee or independent contractor, you need to determine whether the worker is serving in your business or is running their own business. You do this by reviewing the legal rights and obligations in the contract you entered into with your worker.

Contracts are generally written but may also be oral or a hybrid. The contract may also be varied based on the company or the worker’s conduct. The label which you and the worker uses to describe the relationship (such an independent contractor) may not be determinative to how your relationship is characterised.

It is important to have a written contract that sets out the express rights and obligations of the parties.

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