A startup owes different obligations to its workers, depending on whether or not they are classified as a contractor or employee. 

According to Rigby Cooke Lawyers employment law expert Stephanie Burn, businesses owe fewer obligations to contractors than employees.

“For example, eligible employees have statutory entitlements under the National Employment Standards, including annual leave, personal (sick) leave, redundancy pay, pay in lieu of notice of termination, and long service leave,” Burn says.

“An employer must also make requisite statutory superannuation contributions on behalf of employees, must maintain adequate workers’ compensation insurance and must withhold and remit PAYG withholding tax payments under income tax legislation.”

Contractors are not covered by the National Employment Standards, however, businesses still owe some obligations to them, Burn says, including in relation to workplace health and safety.

Find out more: The difference between a contractor and an employee

Burn stresses that businesses should not engage people as contractors, simply to avoid obligations owed to employees.

“If a person engaged a contractor is actually an employee, even though the parties label the relationship as a contractor arrangement, the person may still be considered to be an employee by a Court or the Fair Work Commission.”