Start of relationship test

State referred businesses use the start of relationship test to work out if someone is a contractor or an employee.

Constitutionally covered businesses used this test to work out if someone was a contractor or an employee before 26 August 2024.

Learn more about the test and how it works.

On this page:

Who uses this test

Changes from 26 August 2024

The start of relationship test is used for working out if someone was a contractor or an employee before 26 August 2024.

Some businesses also use the start of relationship test to work out if someone is a contractor or an employee from 26 August 2024.

Independent contractors (contractors) are different to employees and don’t have the same rights and obligations.

Businesses and persons (and the workers they engage) use a test to determine if someone is a contractor or an employee.

The start of relationship test is used by:

For state referred businesses, this test applies for the purposes of most entitlements and obligations.

State referred businesses

State referred businesses are in the national workplace relations system because the state they’re based in referred their powers to make workplace laws to the Commonwealth. They include:

  • sole traders, partnerships, other unincorporated entities and non-trading corporations in:
    • New South Wales
    • South Australia
    • Queensland
    • Victoria
    • Tasmania
  • most of the Victorian state government
  • Tasmanian local government.

State referred businesses also have other rules apply differently to them. To find out more, visit State referred national system businesses.

Whole of relationship test

The whole of relationship test is used by constitutionally covered businesses, and workers engaged by them, for working out if someone is a contractor or an employee from 26 August 2024.

The whole of relationship test applies to state referred businesses for the purposes of a limited number of provisions of the Fair Work Act. Read about these provisions on Exclusions for state referred national system businesses.

The two tests involve many of the same considerations. This means that even if the whole of relationship test applies, it may not change whether a worker is a contractor or an employee.

For more information, visit Whole of relationship test.

Opting out of the whole of relationship test

A worker for a constitutionally covered business who earns more than the contractor high income threshold can choose to use the start of relationship test for working out if they’re a contractor or an employee. They do this by opting out of using the whole of relationship test.

For more information, visit Opting out of the whole relationship test.

How the test works

The start of relationship test determines if a worker is a contractor or an employee based on what the parties have agreed. This agreement will usually be set out in a contract which can be written, verbal or a mix of both. If the parties agree to vary the contract, those changes need to be considered for the purposes of determining if a worker is a contractor or an employee.

If the work being performed changes, but the contract isn’t varied, then the changes usually won’t be relevant in determining whether the worker is a contractor or employee.

There are several factors that can help determine the differences between a contractor and an employee. The factors must be considered together and include:

  • the amount of control over how work is performed
  • financial responsibility and risk
  • who supplies the tools and equipment
  • ability to delegate or subcontract work
  • hours of work
  • expectation of work continuing.

Using the test can be complicated

Working out if someone is a contractor or an employee can be complicated. In some situations, a court may need to determine the nature of the relationship between the parties.

If it’s not clear whether someone is a contractor or an employee, you may want to seek legal advice. Visit Legal help.

Factors of employment or contracting relationships

When considering if a relationship is an employment or contracting relationship, various factors need to be considered.

Using the factors

When determining if a worker is a contractor or employee, remember:

  • whether someone is a contractor or an employee will depend on their specific circumstances
  • all of these factors should be considered
  • there usually won’t be one deciding factor. For example, a worker who has an ABN or issues invoices isn’t automatically a contractor
  • a worker won’t automatically be an employee or a contractor because of the type of work they do. They may perform the same type of work as an employee of a business but may still be a contractor.
FactorsEmployeeContractor
Amount of control over how work is performed
(Note: the other factors below may form part of assessing the level of control over how work is performed)

Performs work under the direction and control of their employer. Work is controlled by the employer including hours, work location and how work is done.

For example:

  • a shop assistant who is required to follow their manager’s instructions about how to serve customers, display clothes and when to tidy the change rooms
  • a gardener whose boss directs them where and when to work and to mow the lawns in a particular way.

Has a high level of control over the work they perform, including their hours, work location and how they do the work.

For example:

  • a tailor who collects garments from clothing stores for alterations when it suits their schedule, makes alterations in the way they choose and works from their own premises
  • a gardener who chooses their preferred suppliers and decides how and when to provide the landscaping services.
Financial responsibility and risk

Has no financial risk (as this is the responsibility of their employer).

For example:

  • a baker who gets paid their regular daily wage even if the bakery doesn’t make a profit for that day (as the employer carries the loss of the unsold baked goods)
  • a painter who spends a day painting a house, and gets paid by the employer for the work performed, even if the home owner has not yet paid the employer.

Carries the risk for making a profit or loss on each task or job. Is usually personally responsible and liable for poor work or any injury sustained while performing the task. Contractors generally have their own insurance policy.

For example:

  • a baker who supplies various baked goods to cafes but burns their croissants one day and can’t charge the cafes for the burnt croissants
  • a painter who paints a house in the wrong colour and doesn’t get paid by the client for the time and money spent.
Tools and equipment

Uses tools and equipment that are generally provided by the employer, or is paid a tool allowance.

For example:

  • an office clerk who has their computer provided for them in the office
  • a cleaner who uses cleaning supplies provided by the employer.

Uses their own tools and equipment. (Note: alternative arrangements may be made within a contract for services).

For example, an auditor who brings their own computer to do their work.

Ability to delegate or subcontract workIs generally required to do the work themselves. For example, they can’t ask someone else to go to their workplace and do their work for them.Can delegate or subcontract the services to be performed to another person or business.
Hours of work

Works standard or set hours (unless they’re a casual employee, in which case their hours may vary from shift to shift).

For example, a person who works regular 5 hour shifts twice a week at a petrol station.

Decides what hours to work to complete the specific task, by agreement between both parties.

For example, a graphic designer who negotiates the cost of creating a logo based on how long it will take and decides when they will do the work.

Expectation of work continuing

Usually has an ongoing expectation of work (note: some employees may be engaged for a specific task or specific period or on a casual basis).

For example, a person in a pet shop who works on a permanent part-time basis 4 times a week.

Usually engaged for a specific task.

For example, a removalist who does a one-off house move for a customer.

Example: Using the start of relationship test

Dana is offered work as a driver for an events company starting in September 2024. Liana from the events company provides Dana with a contractor agreement setting out the terms of the relationship.

Before Dana starts, Liana explains the terms of the agreement and what the work involves. Dana will:

  • use an ABN and issue invoices to receive payment
  • only be engaged for specific tasks
  • use her own vehicle for work
  • attend events at certain times but is free outside of those times.

Dana isn’t sure if the terms of the relationship would make her a contractor or an employee.

Dana checks our website. She sees the start of relationship test applies for state referred businesses in most circumstances.

Dana knows Liana is a sole trader based in Victoria. This means Dana works for a state referred business and should continue using the start of relationship test.

She considers the factors of employment or contracting relationships and compares the examples to her own situation.

Dana determines that she will have a contracting relationship with Liana under the terms of the agreement, in accordance with the start of employment test.

Dana raises this with Liana, and Liana confirms that she also considers Dana to be a contractor.

Dana accepts the offer and starts working for Liana as a contractor.

Entitlements and support

Contractors aren’t entitled to the same pay and conditions as employees.

For information and support, visit Contractor entitlements and support.

Source reference: Fair Work Act ss15AA

Related information