The Difference between PAYG Contractors and Company Contractors

PAYG Contractors: PAYG Contractors are employees of the agency they work for. They do not operate or work within their own company. Their agency/employer is responsible for deducting and paying taxation on their behalf. They receive all legislative benefits and payments any normal employee earns. This includes work cover insurance and superannuation payments.

As a Contractor you are usually paid at a daily or hourly rate which is higher than the rate paid for permanent employees. This difference is to cover any annual holiday or public holiday entitlements and the duration of their employment with the agency through which they are employed.

Company Contractors: Company Contractors are not employees. They have their own registered business with a registered ABN Number. They subcontract to agencies or companies. They invoice their time by providing a weekly, tax invoice. They charge by the hour, day or by the job, depending on what is negotiated. Agencies do not deduct or pay taxation or superannuation, nor do they provide Work Cover insurance, these are all the responsibility of the Company Contractor. They must have on-going public liability and professional indemnity insurance and also charge GST.

In Summary : the difference between a PAYG and a Company Contractor

• The PAYG Contractor is paid wages or a salary (a company contractor is more likely to be paid by submitting an invoice for payment of hours worked);
• Benefits such as annual leave and sick leave are provided to a PAYG Contractor;
• The PAYG Contractor is engaged to perform a variety of duties and work as directed, rather than a Company Contractor who is engaged to achieve a specific result or perform a specific task;
• The PAYG Contractor does not pay their own taxes (for example PAYG, payroll tax), expenses and insurances (for example WorkCover, public liability); A Company contractor however is responsible for obtaining public liability and professional indemnity insurance and has an Australian Business Number (ABN).
• The PAYG Contractor does not keep records of the work they perform; and have to produce invoices for this work. The Company Contractor is responsible for all records up to seven years.