If you are wondering how much you should be paid as a contractor, we have the right article and just the right tool for you.
But before we know how to calculate payroll for contractors, we need to know what contractors are and what they do.
This guide is all about contractors and the Australian payroll calculator for contractors. Here we go:
Australian Payroll Calculator for Contractors:
What are contractors?
A contractor is a worker who provides services to your business. They are working with you to extend their own business. It’s their choice if they want to be presented as a part of your business or not.
Contractors have the free right to choose that from where, how and when they’ll complete their work, considering your instructions obviously. The contractors are hired for a specific task and are paid when the task is done.
Contractors do not owe any duty of loyalty towards their employers since they are not employees.
What if you Misinterpret someone as a Contractor?
You will be charged penalties if you misinterpret someone as a contractor when they are not even one. Here’s what the penalties consist of:
- You will have to pay all the withholding tax for the employment period.
- Paying the superannuation contribution with interest.
- Huge amount of fines, especially if the company is caught in intentional misinterpreting.
How to Pay Contractors in Australia?
Employees receive payments either hourly or salaries. On the other hand, contractors receive payments when their service is done for once and for all. This amount is mutually decided by the employer and the contractor before commencing the work.
The contractor is supposed to give you a receipt of the service fee once the work is done. You can pay them directly after they give you the invoice.
Also contractors are responsible for their own tax obligations , so you are not needed to withhold any amount to give to any authority.
Make sure you pay your contractors in such a way that it clearly differentiates them from regular employees. It will help you avoid any sort of misinterpretation and save you from penalties.
Contractors need to pay their own taxes, superannuation and all other expenses. That is one big reason why contractors are paid higher than the normal employees.
Employees VS Contractors
To put it simply, employees work for and under their employer’s demands and conditions as per the rules of the contract, whereas the contractors are free to work according to their own will. They can even work in different companies at a time whereas employees obviously cannot. They are committed to just one company.
The duties and responsibilities of the employer and contractor might be the same but there are a few factors that the Australian government keeps in view while differentiating between employer and contractor. Here are a few of them:
- The intention and requirement of both parties
- Who pays the Superannuation
- Who pays taxes
- Paid leave is given or not
- If sub-delegation is allowed or not
- Who decides the hours of work
- Who provides the tools for work
Breaking off with the Contractor
You can only break off or terminate the contractor if they were unable to perform their work properly as decided in the mutual agreement between the contractor and the employer or if breaking off is decided in the contract.
But if you break off with the contractor outside of these terms, then that would be considered as unlawful terminating and you could be charged with huge penalties for that.
Calculating Payroll for Contractors in Australia
The easiest, cheapest and error-free way to calculate payroll for contractors is using an online calculator for contractors. This tool has a very user-friendly interface. It is available at all times for your service. You can access it at any time of the day to calculate wage for contractors.
Doing so manually can result in lots of errors and mistakes. Whereas this calculator provides accurate results and precise values. It not only provides you your wage at market rate per hour but also tells about all deductions. It calculates your income after all taxations and gives you a tax-free amount.
You just have to put your estimated hourly rate and the calculator will give you all details, from minor to major. Considering your pay rate, it will tell you what your gross and net income would be.
Obviously, doing all this manually is not easy at all as there are so many factors and deductions that you have to keep in view. These calculators are designed for all types of contractor roles.
Contractors already have much on their plate, so this is also the most time saving option for them. As with the help of this calculator, they can easily make all calculations within a second. Also for the employer who’s hiring the contractor needs this tool to calculate payroll for the contractor.
In this guide, you get to know all that you need to know about contractors, how to pay them and how to calculate payroll for them.
With the help of advanced technology and the inventions of all such tools, the world has become a much better and easier place to live in.
This calculator makes it easy for both- employers and contractors. Employers can easily calculate payroll for the contractors they hire and contractors can calculate their own wage and also the wage of the sub-delegate.
Check Out Diffrence B/W Employe And Contractors
With all this right amount of information, you will never pay incorrectly or can never get paid incorrectly!