What is Contractor vs employee?
A contractor runs their own business and invoices for services; an employee works in the employer’s business under its direction. The distinction is decided on the substance of the relationship, not the label in the agreement. Misclassifying an employee as a contractor exposes a provider to back-pay, superannuation and penalty liabilities.
Contractors are generally not covered by the SCHADS Award and are paid at agreed rates rather than through award interpretation. Superannuation may still be payable where the contract is wholly or principally for the person’s labour, under section 12(3) of the Superannuation Guarantee legislation.
The participant-facing rate does not change either way — the NDIS price limit applies to the support delivered, not to how the worker is engaged. What changes is the provider’s cost and risk.
The test the law applies
Since 26 August 2024, most businesses decide whether a worker is an employee or a contractor using the whole of relationship test. It looks at the real substance, practical reality and true nature of the relationship, including how the contract works in practice, not just what it says. Factors include:
- how much control the business has over how the work is done
- who carries the financial responsibility and risk
- who supplies the tools and equipment
- whether the worker can delegate or subcontract
- the hours of work and the expectation that work will continue
Some businesses and some higher-earning contractors use the start of relationship test instead.
Super for contractors
The ATO treats a contractor paid wholly or principally for their labour as an employee for super guarantee purposes. That usually means they are paid for hours worked rather than a result, and must do the work personally. A business cannot contract out of this obligation, even if the contractor agrees.
What this means for NDIS providers
Support workers who hold an ABN are not contractors for that reason alone. A worker who is rostered by the provider, directed in how they work and paid by the hour may be an employee in substance, with award, leave and super obligations to match. If it is unclear, get legal advice before engaging the worker.
The SCHADS Award applies to employees, not genuine contractors. If a worker paid as a contractor is found to be an employee, the provider can owe award wages, penalty rates, leave and super for the whole period, which is the real cost of getting it wrong.
How Rostery helps
For genuine contractors, Rostery records their invoices against delivered shifts and pays them in a batch using an ABA file.
Questions people ask
Does having an ABN make someone a contractor?
No. The real substance and practical reality of the whole relationship decides it, not the ABN or the label in the contract.
Do I have to pay super for contractors?
Yes, if the contract is wholly or principally for the person’s labour. The ATO treats them as an employee for super guarantee purposes.
What is the whole of relationship test?
The test most businesses have used since 26 August 2024. It looks at the real substance, practical reality and true nature of the working relationship.
Checked against the official sources on 2 October 2026. Rules change: confirm the current position with the agency before you rely on it.
Related terms
More in Payroll & award
Rostery handles this in practice
SCHADS interpretation, NDIS price-guide validation, claiming and the evidence an audit asks for — built for Australian providers.