One of the most important issues that both principals and providers of services in the building and construction industry need to establish is whether they are setting up an employer-employee relationship or a principal-contractor relationship. The distinction is vital because the legal rights and obligations of those who engage subcontractors are significantly different from those applying to people or firms that employ staff.
To take one example, employers are required to provide benefits such as annual leave, personal leave, parental leave and long service leave to their employees, but principals are not required to provide these benefits to independent contractors.
Recent decisions made by the High Court have held that, under the ‘common law test’, in most cases, the question of whether a relationship is one of employment should be answered solely by reference to the terms of the contract. However, amendments to the Fair Work Act 2009 (Cth) which took effect from 26 August 2024 nevertheless require the totality of the relationship between the parties, including not only the terms of the contract governing the relationship but also the manner of performance of the contract, to be considered in characterising a relationship as one of employment or one of principal and contractor.
Read the full Contractor vs Employee – Workplace Relations Fact Sheet
