Contractor vs employee: Pros and cons
Most of us don’t get a choice, but if you’re a contractor thinking of becoming an employee, or an employee thinking of becoming a contractor it’s good to know what you’re getting yourself in for.
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!
Tax time can be confusing. It makes you re-think things you know and face things that you’ve got no idea about. It’s also important that you get it right first time, to avoid penalties or delays later on.
One of the major ways that your tax return will vary depends on if you are a contractor or an employee. You should know which you are, and which return type you are filing.
- Individuals starting from $79*
- Sole trader starting from $150*
- Ride sharing tax returns start from $110*
FinTax Group Offer
Qualified to handle your tax and financial needs.
Help you complete your tax return if you have more than one job, or income from other sources such as investments.
Offers a wide range of services from tax advice to business setup and advisory.
Compare our online tax providers below
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
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 employment?
- Regularity and routine.
- Salary and benefits.
- Tax usually taken from pay-cheques.
- Not usually possible to set own hours.
- Set amount of annual leave.
- Often have to travel to office.
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.
- No fixed income or benefits.
- Responsible for own tax and finances.
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
Amazon Prime Day 2021 Australia: Early deals on now
Amazon Prime Day 2021 officially starts on June 21 - or does it? Here's a stack of early-bird deals you can get right now.
Handypay Green Loan
A Green Loan from Handypay could help you make your home more energy-efficient. Handypay green loans are available up to $75,000 on terms of up to 10 years.
Victoria floods: How much food spoilage will your home insurance cover?
There’s been over 25,000 power outages across Victoria. Home insurance can reimburse you for the food that’s gone to waste. Find out who here.
TCL 20SE Review: Great display but otherwise unremarkable
If you're after a low-cost mobile with a quality display, the TCL 20SE is appealing, but you'll otherwise be left wanting for app performance, camera quality and battery life.
Today’s ASX top stocks: Moneyme (MME ↑18.8%), Cd Private Equity Fund I (CD1 ↑18.5%)
The 10 biggest movers on the ASX for Tuesday 15 June 2021.
Amazon Prime Day: 60% off fashion deals you’re not going to want to miss
Bargain hunters - get ready to save on Nike, New Balance, Cotton On, Tommy Hilfiger, Calvin Klein and so much more.
Amazon Prime Day home deals to expect: Bose, iRobot and more
From home speakers to robot vacuums, these are the items to watch out for this Prime Day.
Bitcoin up 21%: Will El Salvador’s big news kick off a fresh bull run?
Bi-weekly gains of just under 9%.
Staple items worth a splurge and how you can grab a cheeky 30% off all of them
We've got a cheeky 30% off at THE ICONIC so here are the staple items worth a splurge because the savings are too damn good.
Ask an Expert