Hiring Contractors from Outside Australia

Articles
September 20, 2021
Andy

When you are hiring from outside Australia, it is important to first ascertain whether you are hiring an employee or an independent contractor.

Employees and independent contractors can, at the very simplest, be defined by the relationship to the employer. In general, there is a relationship of ‘servitude’ between employee and employer, where the employee is subservient to the employer and must carry out duties and tasks for remuneration. An independent contractor, on the other hand, has a trade or business of their own with no subservient relationship to the employer.

There are other key points that help to define whether someone is an employee or an independent contractor.

Employees vs Independent Contractors

There are several ways to determine if someone is an employee. Some of the most common are:

The employer will be able to direct how the duties are carried out.
All commercial risk is carried by the employer, not the employee.
The employer will define the location and time of work.
Remuneration will be in the form of a salary or wages.
The employer provides the tools, equipment and materials for carrying out the work.

On the other hand, the following points may indicate that someone is an independent contractor:

The contract hinges on a result, rather than ongoing labour.
The worker carries the commercial risk, along with responsibility for loss due to poor workmanship.
The worker sets their own hours of work.
Payment for work is given on receipt of an invoice.
The worker provides their own equipment.

Which Country’s Laws Will Apply?

When you hire a contractor, you will need to include a clause in the Contractor Agreement that states the jurisdiction and government law. It usually makes sense to use Australian law, because you will have easier access to legal services and courts in Australia. You will also need to check whether there are any overseas laws that apply.

Payment and Taxes

Generally speaking, because contractors pay their own taxes, you will be able to pay the contractor the amount set out in the Contractor Agreement. Some countries have agreements with Australia that will affect the amount of tax the contractor needs to pay, so this is important to bear in mind.