25/09/2026
Contractor or Employee? Getting the Engagement Right Matters.
For many small businesses, engaging a contractor can provide flexibility, specialist expertise and additional capacity without immediately increasing the permanent workforce.
But contractor versus employee isn’t simply a choice a business owner makes.
The nature of the relationship matters.
Under current Fair Work rules, depending on the type of business, determining whether someone is an employee or contractor can involve looking at the real substance and practical reality of the relationship. Factors can include who controls how the work is performed, financial risk, provision of tools and equipment, ability to delegate or subcontract, working hours and whether there is an expectation of ongoing work. Having an ABN or sending an invoice does not automatically make someone a contractor.
And it isn’t only a Fair Work consideration.
The way a worker is engaged can also create ATO obligations, including tax and superannuation considerations. Incorrectly treating an employee as a contractor can also expose a business to risks around employment entitlements and sham contracting.
For small business owners, the starting point should be:
What does my business actually need, and what type of engagement appropriately reflects how this person will work within the business?
Getting that right at the beginning can prevent expensive and difficult problems later.
At Peel People Solutions, we help small businesses think through their workforce needs, establish appropriate people systems and put the right documentation and processes in place to support sustainable growth.
Because good HR isn’t just about fixing problems.
It’s about designing your people practices well enough to prevent them.
Fair Work Ombudsman: Independent contractors