What is a contractor?
A contractor describes a person or business that enters into a contract with another person or business for work, usually at a fixed price. Contractors are not employees of a business as they are not legally bound under an employment contract. It is therefore important to ensure you have a clear agreement in place both as an employer and as a form of contractor.
- Contractors usually run their own business and are hired to do a set task or tasks based on certain terms within a contract. Independent contractors generally use their own processes, tools and methods to complete the work. They can delegate or subcontract some of the tasks if they need, and can work for a number of different clients at the same time.
- A subcontractor is an independent contractor that’s hired by another independent contractor to help them complete their contracted work. There can also be second-tier subcontractors, where an individual or business is contracted by subcontractors to do work.
What is the difference between a contractor and an employee?
Compared to contractors, employees have very different rights and obligations. Employees are generally:
- paid a wage
- have set hours of work
- entitled to paid holiday leave and sick leave
- entitled to superannuation.
Because employees have certain rights that contractors aren’t entitled to, sometimes employers try to disguise an employee as an independent contractor, to avoid having to provide them with their entitlements. This is known as sham contracts and is illegal. It’s important to note that even if you have an ABN, that doesn’t automatically make you a contractor.
Can an Owner Builder obtain Home Builders Warranty Insurance?
Insurance under the Home Building Compensation Fund is no longer available for work done by an owner-builder.
As an owner-builder, if you decide to sell your home within seven years and six months after an owner-builder permit was issued, the contract for sale must include a note stating that: an owner-builder permit was issued in relation to the land on the date it was issued.
As an owner-builder you are guaranteeing the work you undertake. The next immediate owner of the property is entitled to the benefit of the statutory warranties set out in the Home Building Act 1989, and can take you, the owner-builder, to the NSW Civil and Administrative Tribunal to enforce their statutory warranty rights.