Employee vs Contractor (Workers Compensation) -Part 4

Employee contractor workers compensationIf an employer hires employees whether on a full time, casual or contract basis, and the annual wages are more than $7,500, the employer is required to have a worker compensation insurance policy. On the other hand, there is no worker compensation insurance policy requirement for hiring contractors. It is therefore critical for the employers to identify and insure all employees including deemed employees for worker compensation purpose.

A contractor for worker compensation purposes is more likely to:

  • carry on an independent business
  • supply his or her own tools and materials
  • employ or delegate to others
  • performance a particular task
  • be paid on the basis of a quotation

An employee for worker compensation purposes is more likely to:

  • be subject to direction from the employer as to the work to be done
  • personally carry out the work
  • be paid on a time basis
  • have tools and materials supplied by the employer
  • work exclusively for a single employer

There is no direct relationship between an employee for tax purposes and an employee for worker compensation purposes.

Employers should be aware that although they are not required to have worker compensation insurance policy for the contractors, it is prudent to check if the engaged contractors have taken out appropriate workers compensation coverage and keep of a copy of the certificate of currency on file.