What is the difference between an independent contractor and a sub-contractor?

A contractor is not classified as an employee, which means that it is not afforded the same entitlements under the Fair Work Act 2009 (Cth). If you are unsure if you should be classified as a contractor or an employee, see the Employment Law Online post “How will I know if I am actually a contractor or employee?”  or fill out the form at the bottom of the page to obtain legal advice with respect to sham contracting.

Independent contractors and sub-contractors are two different types of contractors.

Independent Contractors

Independent contractors generally manage their own businesses and perform work in accordance with a contract for one or more clients at once.

Independent contractors enjoy the right to a safe and healthy workplace under the Workplace Health and Safety Act 2004 (Vic). Independent contractors may be entitled to superannuation contributions and protections under workers compensation legislation, depending on the terms of the contract and the engagement.

Independent contractors are generally not entitled to take annual or personal leave, or receive redundancy payments.

Sub-contractors

Sub-contractors are hired by independent contractors to assist in completing the work under the contract.

Some principals will not allow an independent contractor to engage a sub-contractor. It is important for independent contractors to discuss the option of engaging a sub-contractor to perform a job with the client, and preferably include details of the arrangement in the contract between the client and the independent contractor.

Like independent contractors, sub-contractors enjoy the right to a safe and healthy workplace under the Workplace Health and Safety Act 2004 (Vic).

If an independent contractor does engage a sub-contractor perform some work under a contract, it may be liable for paying superannuation or workers compensation to the sub-contractor. If you are an independent contractor unsure of your obligations, or a sub-contractor unsure of your entitlements, you should not hesitate to seek legal advice.

While a principal may owe obligations to an independent contractor (as outlined above), it is highly unlikely that it will owe obligations to the sub-contractor because there is no contract between the parties.

This is because the sub-contractor entered into an agreement with the independent contractor, which is usually separate from the agreement between the client and the independent contractor.