Martin Nally, Mentor

I’m a bit confused over the definitions of sole trader, independent contractor and freelancer. Help!

StartupSmart /

I’m a bit confused over the definitions of sole trader, independent contractor and freelancer. Are there significant differences between them and which should I go for if I want to take on one of them for a short period of time?

 

Fundamentally the answer is no. They are the same – with different tags. Each will invoice you for services performed.

 

None of them are your employees. All of them are contracted by you to deliver a project outcome.

 

The sole trader moniker is simply indicating that they carry out business on their own.

 

The freelancer is basically a contractor in Australia, meaning they own their business.

 

The independent contractor is, as it states, a contractor engaged on an independent basis and not an employee.

 

It is recommended that each of them supply you with their ABN. It is free to get an ABN that is basically just for the business name.

 

You can safely use any of the resources that go under the three banners. If it is for a short time then document the scope and have a separate document for each engagement.

 

One of the most important pitfalls to avoid when it comes to categorising your workers is ‘sham contracting.’

 

The Fair Work Ombudsman is currently conducting audits of three industries – hair and beauty, cleaning and call centres – in a crackdown on sham contracting.

 

This occurs when an employee is made to believe that they are providing a contract for services, allowing a business to avoid paying them superannuation, leave or fair wages.

 

Whatever you do, don’t fall foul of the Fair Work Ombudsman in this area.

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