An employee works for and is part of your business. An employee is generally:
paid a wage
has set hours of work
entitled to paid holiday leave and sick leave
entitled to superannuation guarantee charge (SGC), and
covered by Workers Compensation Insurance.
A contractor/subcontractor operates their own business (they will generally have their own ABN) and is not entitled to any of the above benefits from the business that has entered into an agreement to contract their services.
Contractors are required to purchase their own insurance prior to work being carried out, to cover themselves from liability risks or personal injury. Businesses that hire contractors should ensure that they have their own insurance policies covering them if they are injured on site, as well as if they cause property damage or bodily injury to a third party while working in connection with your business.
LEARN MORE ABOUT BUSINESS INSURANCE