Contractor vs employee: Pros and cons
The main different between an employee and a contractor is contractors are responsible for their own financial admin including superannuation and tax, and may not be eligible for things like annual leave and sick leave.
We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!
Contractor vs employee
What is an employee?
An employee is someone who works for a business to perform a specific duty in an open ended, permanent contract. The employee is expected to complete their role and in return their employer will take care of all of the practicalities of employment, including superannuation, payroll tax, sickness and annual leave.
What is a contractor?
Contractors are typically self employed people engaged by a company or individual for a specific task, which they often do for an agreed price and with a pre-arranged time frame. Contractors don't work for anyone exclusively, but rather work for themselves and as such are responsible for a lot of the duties that an employee may not have.
Why do businesses need employees?
Businesses employees complete tasks that are open ended and constantly required for the running and growth of their business. Most workers are employees of their business. They typically have set hours, set salaries and set bonuses built into their contract. They tend to get superannuation, leave hours and more stability with their contract.
Why do businesses use contractors?
Business use contractors to perform tasks that are only required seasonally or for short periods of time. For example, if a window broke, it would make more sense for a business to contract a glazer to fix the single window, rather than employing one. Businesses may use contractors to cover particularly busy periods, such as shops over Christmas or holidays perks in the summer. A lot of businesses have temporary projects where it would be a lot more cost efficient to use a one-off, contractor.
What are the pros and considerations of being an employee?
- Regularity and routine.
- Fixed salary and benefits e.g.: bonuses
- Employer is required to pay your super
- You're entitled to sick leave and annual leave
- Tax usually taken from pay-cheques by your employer.
- Less flexible, not usually possible to set own hours.
- Set amount of annual leave.
- Often have to travel to a set location.
What are the pros of considerations of being a contractor?
- Can set own hours.
- Often able to work from home or remotely.
- Variety of work and hours.
- Pick and choose the jobs you want to do, and the ones you don't.
- No fixed income or benefits.
- Responsible for own tax and superannuation.
Which is better?
It isn’t really a case of which is better, or which is worse, it’s usually more a case of which works better for the individual. Some people enjoy the routine and regularity of having employment, while some people prefer the freedom and variety of being self employed.
It’s also important to consider where you are in your life, for example, if you don’t have a family then you may prefer and have the time to be an employee, whereas if you have a young family or other commitments, you may prefer the flexibility of being a contractor.
In summary, it isn’t really about which is better or which is worse, it is more about the type that works better for you and for your industry. Both have positives and negatives, and while one might suit one personality type, others will prefer the other.Back to top
More guides on Finder
Jetstar sale: $109 flights to Bali, $169 flights to Phuket
Lock in your holidays to these South East Asian island paradises
$1.8 billion languishing on unused gift cards
Australians are sitting on billions of dollars worth of unused gift cards, according to new research from Finder.
Why has the Z1P share price rebounded today?
Shares in the BNPL operator Zip Co have tumbled 55% in the last 12 months.
Finder Daily Deals: The 7 best deals in Australia today
Today's best online deals include: 40% off KN95 face masks, half-price Remington electric shavers, 60% off Massage Guns.
Today’s ASX top stocks: Sezzle (SZL ↑16.8%), Codan (CDA ↑16.5%)
The 10 biggest movers on the ASX for Tuesday 25 January 2022.
Garage Door Installation
Hire the right garage door installation service provider by comparing your options here.
What you need to know about ESG investing
Here is everything you need to know about how to start your own ESG portfolio.
What happens if Russia bans crypto?
Bank of Russia proposes banning cryptocurrency use and mining, but it may have a limited effect on the crypto markets.
Get Money Fit Class #1: Score goals with your credit score
Want to get money fit? That starts with knowing where you stand right now.
New NFT gaming platform Balthazar raises US$3 million in token sale
An innovative NFT gaming platform enters the play-to-earn sphere.
Ask an Expert