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Understand the difference between employees and contractors

SOLVEDby QuickBooks7Updated 1 month ago

Learn the basics about classifying a new worker as an employee or a contractor.

Deciding if you can hire someone as an employee or contractor is a big decision. It impacts taxes, what you need to do for payroll, and more. The government has a lot of rules around this, but here is a basic overview and some links that may help you.

Employee vs contractor

An employee is a person hired by the employer. The employer generally has more control over an employee. A contractor is a self-employed person who provides services to businesses, generally on their own terms.

Use the ATO's guidelines to determine your worker classification.

If your worker is an employee, you must:

  • Withhold payroll taxes (PAYG withholding).
  • Pay super (for eligible employees).
  • Withhold Medicare levy.
  • Report and pay fringe benefits tax (FBT) (for eligible employees).

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