Contractor vs Employee
Compare the tax implications, super requirements, and true take-home pay
Side-by-Side Comparison
Employee
Contractor
A contractor needs to charge ~30% more to match an employee's total package value
Key Differences
| Factor | Employee | Contractor |
|---|---|---|
| Super | Employer pays 11.5% | Self-funded |
| Leave | 4 weeks annual + sick leave | No paid leave |
| Tax | PAYG withheld by employer | Pay via BAS quarterly |
| GST | N/A | Required if >$75k |
| Deductions | Limited work expenses | Business expenses deductible |
| Job Security | Notice period, redundancy | Contract terms only |
Sham Contracting Warning
If you're called a "contractor" but work like an employee (set hours, one client, using their equipment, no control over work), the ATO may deem you an employee. This can result in back-payment of super and penalties for the business.
Frequently Asked Questions
Do contractors pay more or less tax than employees?
Contractors and employees pay the same income tax rates. However, contractors can claim more business deductions but must pay their own super (no employer contributions) and handle GST if earning over $75,000.
Do contractors get super?
Contractors don't automatically receive super from clients. You must set aside your own super (typically 11.5% of income). Some contractors receive super if they work primarily for one client under a "deemed employee" arrangement.
How much should a contractor charge vs employee salary?
A general rule is contractors should charge 30-50% more than an equivalent employee salary to cover: super (11.5%), lack of leave (8-10%), insurance, admin costs, and business risk.
Can I be a contractor if I only work for one company?
The ATO may deem you an employee for tax purposes if you work exclusively for one client, use their equipment, and don't have control over your work. This affects super guarantee and PAYG obligations.
Related Guides
Calculate Your Take-Home Pay
Compare employee vs contractor scenarios with our calculators.