Contractor Engagement Checklist

The stakes with contractors

Engaging a contractor looks simple: they invoice, you pay, no payroll. But Australian law doesn't care what the invoice says — it cares what the working relationship actually is. Get it wrong and you can owe superannuation, leave entitlements and back-pay for someone you thought was a supplier. The good news is that a disciplined engagement process catches almost all of it. This checklist covers the full lifecycle.

It's general guidance rather than a determination for any particular arrangement — the ATO and the Fair Work Ombudsman each publish current tests, and borderline cases deserve professional advice.

Before engaging: is this genuinely a contractor?

• Assess the substance of the relationship, not the label. Consider control over how work is done, ability to delegate or subcontract, who bears commercial risk, who supplies tools and equipment, and whether they're building their own business or working in yours. The ATO and Fair Work Ombudsman both publish current multi-factor guidance — use it.
• Check whether super applies anyway. Some contractors are deemed employees for superannuation purposes even when genuinely contracting — particularly where the contract is principally for their labour. Verify against the ATO's current rules before assuming super isn't payable.
• Confirm the ABN is valid and active via ABN Lookup, and check their GST registration status so you know what their invoices should look like.
• Check payroll tax treatment. Several states bring certain contractor payments into payroll tax — your state revenue office's current provisions are the authority.

Setting up the engagement

• Put a written agreement in place before work starts, covering scope and deliverables, rates and invoicing terms, term and termination, and who owns what's created.
• Nail down intellectual property explicitly. Unlike with employees, IP created by contractors doesn't automatically belong to you — the contract has to say so.
• Include confidentiality obligations and, where relevant, restraint provisions appropriate to the engagement.
• Sight their insurances: public liability, professional indemnity where the work is advisory, and confirm workers compensation arrangements — in some states and situations you may still owe cover; check your state's scheme.
• Verify licences and qualifications for regulated trades and professions, and keep copies on file.
• Set up system access deliberately: a scoped account, not a shared login, with an expiry date matching the engagement.

During the engagement

• Watch for relationship drift. A contractor who now works set hours you direct, uses only your equipment, appears on your org chart and takes leave requests to you has drifted toward employment. Reassess long-running engagements periodically — duration itself changes the risk profile.
• Keep invoices, payments and the agreement filed together. If the classification is ever questioned, contemporaneous records are your evidence.
• Pay to agreed terms. Late payment to small-business contractors carries its own obligations and reputational cost.
• Manage performance through the contract — deliverables and milestones — rather than through employee-style direction and performance management, which undermines the contractor characterisation.

Ending the engagement

• Terminate per the contract, with written confirmation of the end date and any final deliverables.
• Revoke all access on the last day: systems, email, building access, shared drives. Orphaned contractor accounts are a common security hole.
• Confirm handover of work product, credentials and documentation before final payment where the contract allows.
• Do a short debrief note: would you re-engage, at what rate, and what would you scope differently. Future-you will thank you.

Make it repeatable

The businesses that get contractor engagement wrong are usually the ones doing it ad hoc — a different process every time, driven by whoever's in a hurry. Turn this checklist into a standard onboarding pack (agreement template, insurance request, access form) so every engagement runs the same way. That's the same logic behind systemising your business generally, and it's where a connected back office earns its keep — the finance, legal and IT steps all happen once, together, instead of three separate scrambles.