Contractor vs Employee Calculator
Compare total cost of hiring a contractor versus an employee, with ATO classification risk assessment.
Employee Cost
Contractor Cost
ATO Contractor vs Employee Assessment
Tick the factors that apply to your arrangement. More ticks = more likely to be considered an employee.
ATO Contractor vs Employee Rules
- The ATO uses a multi-factor test to determine if a worker is an employee or contractor. No single factor is decisive.
- Sham contracting penalties can be up to $93,900 per contravention for individuals and $469,500 for companies under the Fair Work Act.
- Since 1 July 2022, super guarantee applies to contractors paid wholly or principally for personal labour and skill, regardless of whether they have an ABN.
- When in doubt, use the ATO's Employee/Contractor Decision Tool or seek professional advice.
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Contractor vs employee: the true cost comparison
The headline salary or day rate rarely tells the full story. An employee on $85,000 actually costs the business $100,000+ once you add superannuation (12%), workers compensation, payroll tax, leave loading, training, equipment, and HR overhead. A contractor at $650/day for 220 days costs $143,000 before management overhead - but they provide their own tools, insurance, and super.
This calculator helps you compare apples with apples by accounting for all the hidden costs on both sides, calculating the effective cost per productive day, and identifying the break-even contractor rate.
ATO contractor vs employee rules
The ATO uses a multi-factor test to determine whether a worker is an employee or independent contractor. Key factors include: who controls the work, whether the worker can delegate tasks, who provides tools and equipment, who bears financial risk, and whether the worker operates their own business. No single factor is decisive - the overall nature of the relationship determines the outcome.
Sham contracting penalties
If the ATO or Fair Work determines a worker has been misclassified as a contractor when they should be an employee, the business may face penalties up to $93,900 per contravention for individuals and $469,500 for companies. Additional liabilities include back-payment of super, PAYG withholding, leave entitlements, and payroll tax.
Super obligations for contractors
Since 1 July 2022, super guarantee applies to contractors who are paid wholly or principally for their personal labour and skill, regardless of whether they have an ABN. This means many "contractor" arrangements now attract a 12% super obligation on top of the contracted rate.
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