Is it Quacking? The Easiest Guide to Employee v Subcontractor

I am soooo surprised that I saw a post on Social Media this week questioning how does a Business decide if they have a employee or a Subcontractor.

OK, while there are a few bits of legislation at work here and it was in "tradie" page (the building Industry always seem to think they have their own rules. Ever since I have been a Practising BAS agent I have lived by the duck test. If a nameless animal is walking like duck, swimming like a duck, living with ducks, quaking like a duck it is probably a duck.

Same scenario in business: if you engage someone that for all intents and purposes behaves like a employee they probably are one (in any Industry in Australia) but that is a very short blog so lets entertain the discussion and break it down.

Employee vs Subcontractor in Australia: A Legal Comedy of Errors

Cue dramatic music.

It's a classic showdown in the land Down Under, right up there with kangaroo vs emu or VB vs literally any other beer. In the red corner, we have The Employee—steady, dependable, and covered in entitlements. And in the blue corner, The Subcontractor—independent, self-reliant, and probably writing this blog off as a tax deduction.

But what actually is the difference between an employee and a subcontractor in Australia, legally speaking? And more importantly—can you hire someone, call them a "subbie", and not end up with Fair Work breathing down your neck like a seagull at a beach BBQ?

Let's break it down—with humour, and hopefully without needing a lawyer on speed dial.

Round 1: Control Freaks vs Free Spirits

Employees are like houseplants. You tell them when to show up, what to do, how to do it, and occasionally you water them (read: pay them annual leave). You control the work and the method. They're yours—at least between 9 and 5 or the hours you have set up for them.

Subcontractors, on the other hand, are more like freelance magicians. You hire them for a trick, they do it their way, then vanish into a puff of GST and invoice templates. You can't tell them how to do the work—just what you need done.

🧠 Legal takeaway: The more control you have, the more likely it's an employment relationship. So, back off a bit, boss.

Round 2: Tools of the Trade

Employees use your tools, drive your vehicles, and steal your pens (and let's be honest—your will to live during payroll unless you have it automated or outsourced - seriously call me).

Subcontractors bring their own gear. If they rock up to your site with a ute full of equipment, a branded shirt, and an ego the size of Uluru, they're probably subcontractors.

🧠 Legal tip: If you're supplying everything, the ATO might see you as an employer—even if you've been calling your worker "Dave the Independent Legend" on the invoice.

Round 3: Payday Shenanigans

Employees get a regular wage, superannuation, leave entitlements, and a shot at office cake.

Subcontractors? They get a big fat invoice, a handshake, and the honour of doing their own taxes (poor souls). No sick leave. No super (unless the law says otherwise). Just sweet, sweet ABN freedom.

🧠 Legal truth bomb: Just because someone has an ABN doesn't mean they're a contractor. It's about the whole relationship, not just the paperwork.

Round 4: The Ol' Sham Contracting Trick

You might be tempted to slap a "contractor" label on someone to dodge super or leave. That's called sham contracting, and it's as illegal as stealing a sausage from Bunnings.

The Fair Work Ombudsman is not impressed by dodgy contracts that treat employees like subcontractors. Neither is the ATO (for that little thing call the Superannuation Act that was enabled before Howard was PM) The fines? Spicy. The legal battles? Brutal. The regret? Eternal.

🧠 Don't do it. Just… don't.

Bonus Round: The Duck Test (Legal Edition)

If it quacks like an employee, waddles like an employee, and uses your microwave to heat up tuna… yeah, probably an employee.

Courts will look at the totality of the relationship, not just what's written in the contract. You can call someone a "freelance workflow ninja", but if they act like a regular worker, the law will call you out.

Final Verdict: Employee or Subbie?

Here's a cheeky checklist:

Criteria	Employee	Subcontractor
Has an ABN	❌	✅
Controls their own work method	❌	✅
Uses own tools	❌	✅
Paid per job, not hourly	❌	✅
Gets super, sick leave, etc.	✅	❌
Can subcontract the work	❌	✅
Works for multiple clients	❌	✅

If you've ticked most boxes on the left—congrats, you've got an employee! Get the payslips ready. But remember the WHOLE relationship, if you have things on both sides get some advice or just pay them as an employee (scroll back to Round 4)

Just because it's convenient to call someone a subcontractor doesn't mean the law will agree. Fair Work and the ATO are like your nan—sharp-eyed, no-nonsense, and very unimpressed by your "creative" business structure.

If in doubt? Get proper legal advice. Or better yet—pay people properly. It's cheaper than a lawsuit and better for your sleep.