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Subcontractor vs Employee Meanings

Whether you’re a new business owner, a contractor thinking of becoming an employee, or an employee thinking of becoming a contractor it’s good to know what you’re getting yourself in for. The difference between an employee and independent contractor is based on many different factors, such as degree of control over work performed, hours of work, expectations, risk, and benefits, and can have massive legal implications if unclear or dealt with wrongly.

Employee Meaning

An employee is employed by a company in a part-time or full-time capacity under a contract agreed upon before commencing work. Some common indicators of someone being an employee are:

  • Boss controls how work is performed
  • Part of the business on an ongoing, regular basis
  • Paid under contract
  • Company supplies equipment and materials
  • Company handles tax, super and workers comp
  • Represents the company they are employed by
  • Entitled to benefits – sick leave and the likes

Subcontractor Meaning

Comparatively, a subcontractor is a firm or person that has a contract with a contractor to provide some portion of the work or services on a project which the contractor has agreed to perform. Some common indicators of someone being an employee are:

  • Does work their way
  • Stand alone as their own business, can work for multiple businesses at the time
  • Issue an invoice to be paid
  • Subbies supply own equipment and materials
  • Subbie handles own tax and super
  • Represents themselves or their own business

Learn more about contractors & their rights and responsibilities here.

Pros & Cons of Employees vs Subcontractors


  • PRO: Guaranteed income & fixed work hours
  • CON: Lack of control over work you do
  • PRO: Leave benefits
  • CON: Limited scope for development
  • PRO: Less responsibility or risk
  • CON: Might not be paid what you’re worth
  • PRO: Job security


  • PRO: You’re your own boss
  • CON: You don’t get benefits or paid leave
  • PRO: You can charge a higher rate
  • CON: No job security
  • PRO: You might pay lower income taxes
  • CON: Few labour law protections
  • PRO: Flexibility of how and when you work
  • CON: No workers compensation

Why Does it Matter?

What's the difference and why does it matter? We asked our expert, Gillian Bristow, to explain things from an employer's perspective and some legal considerations to keep in mind! Gillian is a lawyer with 25 years practice in the transport sector, helping transport clients in relation to all aspects of their businesses, including negotiating contracts with clients, agents, suppliers and subcontractors and assisting with tender submissions. Here’s some things she thinks you need to know.