The template has landed in your inbox: your client's standard independent contractor agreement, or the contractor's own services agreement, with a request to sign before work starts next week. You are about to commit to how much you will pay, who owns the work, and who wears the risk if the job goes wrong, so it is worth reading the document clause by clause before you sign.
An independent contractor agreement is a contract for services. It engages a person or business to deliver defined work without creating an employment relationship, and it binds the parties to the scope, price, deadlines, confidentiality and liability they have agreed. It also displaces default legal rules: for example, without a written assignment, the contractor normally owns the copyright in the work they create for you. What the document cannot do is settle, by itself, whether the person is a genuine contractor or an employee. Under s 15AA of the Fair Work Act 2009 (Cth), that question is answered by the real substance of the relationship, not by the label the parties put on it. That single fact should shape how you draft every clause below.
The clauses to get right
The scope of work
The first clause should describe, as precisely as possible, what the contractor is engaged to deliver. A vague scope is the most common source of later disputes: the business assumes the contractor will handle whatever comes up, the contractor works to the letter of the brief, and the two sides argue about whether the extra work was "in scope".
The drafting choice that matters most is specificity. For a defined project, set out the deliverables, the milestones or completion dates, and what "done" looks like. For an ongoing or as-needed arrangement, list the services the contractor may be asked to perform and the mechanism for requesting them, for example a written service order or statement of work that both parties approve before each engagement begins.
- Deliverables and milestones: name each output and its due date so both parties can measure completion.
- Hours and attendance: if the contractor must be on site or available at set times, say so.
- One-off versus ongoing: a fixed project with a defined end date reads differently from an open-ended retainer.
- Approval of extra work: require written approval before the contractor does anything beyond the scope, so there is no surprise invoice at the end.
Fees, payment and super
The payment clause should state the rate or fixed fee, when invoices are due, and how payment is made. It should also address GST: if the contractor is registered for GST, their invoices will add GST on top of the fee, and you can claim an input tax credit if you are registered yourself.
There is a trap here that catches many businesses. A contractor who is paid wholly or principally for their labour is treated as an employee for superannuation guarantee purposes under s 12(3) of the Superannuation Guarantee (Administration) Act 1992 (Cth). If your agreement engages an individual to perform work personally, you may be required to pay superannuation on top of the fee at the legislated rate, which is 12% from 1 July 2025, even though the person is a contractor for other purposes. The contract should state whether the fee includes superannuation or is payable in addition to it, and the contractor should be required to invoice accordingly.
- Invoicing and terms: agree when invoices can be issued and when they are due, for example 14 or 30 days from receipt.
- How the fee is structured: a fixed price for the project, an hourly or daily rate, or a retainer. Paying a set weekly amount with no invoice looks like a wage.
- Superannuation: deal with the s 12(3) labour-contractor position expressly rather than hoping it does not apply.
- Expenses: state whether the contractor can claim expenses and what evidence is required.
How long the arrangement runs
The term clause should say whether the engagement is for a fixed period or ongoing. A project-specific engagement should name the start and end dates. An ongoing engagement needs a workable termination clause, because the whole point of contracting is that either side can end the relationship more easily than an employment.
Two drafting choices matter here. First, termination for convenience: allow either party to end an ongoing arrangement on written notice, typically 14 to 30 days. Second, what survives termination: confidentiality, intellectual property assignment, restraints and indemnities should all state expressly that they continue after the engagement ends, otherwise you can lose those protections at the moment you most need them.
- Fixed term: include an end date and state what happens if the project overruns.
- Termination for convenience: written notice period for either side, with payment for work done up to the termination date.
- Termination for breach: the right to end immediately for serious breach, and a right to remedy for lesser issues.
- Survival: list the clauses that keep operating after the agreement ends.
The contractor status clause
Most templates include a clause in which the contractor acknowledges they are an independent contractor, with no entitlement to leave, notice or redundancy, and responsibility for their own tax and super. That clause is worth including, but it is not the protection most businesses assume it is. Since 26 August 2024, s 15AA of the Fair Work Act 2009 (Cth) says the question of whether a person is an employee is decided by "the real substance, practical reality and true nature of the relationship", looking at the totality of the relationship, including how the contract is performed in practice. Parliament enacted that test in response to the High Court decisions in CFMMEU v Personnel Contracting [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2, which had directed attention to the terms of the written contract. The message for a drafter is that the words on the page matter, but so does what actually happens on the ground.
The stakes are high. If the relationship is really employment, the worker can claim entitlements such as leave, notice and super, and the business faces the sham contracting provisions in the Fair Work Act 2009 (Cth): s 357 prohibits misrepresenting an employment relationship as an independent contracting arrangement, s 358 prohibits dismissing an employee to re-engage them as a contractor, and s 359 prohibits false statements made to persuade an employee to become a contractor. Each is a civil remedy provision with penalties attached.
- The label: keep the acknowledgment clause, but understand it does not decide status.
- How the work is supervised: directing how, when and where the work is done points to employment; specifying the outcome to be achieved points to contracting.
- Exclusivity: a contractor who can work for other clients looks far more like a genuine contractor than one who is available only to you.
- Equipment and risk: the contractor supplying their own tools and bearing the commercial risk of the engagement supports contractor status.
- Review the relationship: if the day-to-day reality drifts towards employment, the written clause will not save you.
What the contractor must do
The obligations clause sets out the contractor's responsibilities beyond delivering the work. These depend on the industry and the nature of the services, but a few are common to most arrangements.
- Licences and qualifications: require the contractor to hold and maintain any licence, registration or qualification needed for the work, and to produce evidence on request.
- Equipment: state whether the contractor supplies their own tools, software and premises.
- Compliance with laws: require the contractor to comply with all laws relevant to the services, including work health and safety obligations on your site.
- Subcontracting: decide whether the contractor may delegate the work to others. If you are engaging a particular person for their expertise, require that the work be performed personally unless you approve a substitute in writing.
- Their own obligations: confirm the contractor is responsible for their own tax, superannuation and insurance as a business.
Who owns what is created
The intellectual property clause is where many contractor agreements go wrong. Under s 35 of the Copyright Act 1968 (Cth), the author of a work owns the copyright in it. The exception for works made in the course of employment (s 35(6)) does not apply to independent contractors, so a contractor who writes copy, designs a logo or builds software for you owns the copyright in it unless the agreement says otherwise. There is a narrow statutory exception: the person who commissions a photograph, portrait or engraving for a private or domestic purpose owns the copyright in it (s 35(5)), but that will rarely cover commercial work.
The drafting choice that matters most is whether the contractor assigns the intellectual property to you or merely licences it to you. If you need to own the work outright, the clause should assign all existing and future intellectual property created under the agreement, and it should require the contractor to sign any further documents needed to register or perfect the assignment. If a licence is enough, specify its scope: exclusive or non-exclusive, the territory, the duration, and whether you can sublicense.
- Assignment versus licence: decide what you actually need, then draft for it.
- Future IP: an assignment that covers only work existing at signing date misses everything created during the engagement.
- Third-party material: require the contractor to warrant that any material they bring to the work (fonts, stock images, libraries) is licensed for your use.
- Moral rights: the contractor's moral rights to attribution and against derogatory treatment cannot be assigned, so include a consent to their exercise of those rights in the way the business needs.
- Pre-existing IP: state who owns each party's pre-existing intellectual property and how it may be used in the engagement.
Keeping secrets
A confidentiality clause protects your customer lists, pricing, methods and any other information the contractor sees while working for you. It should define what counts as confidential information, restrict use to the purposes of the engagement, and require the contractor to return or destroy your material when the engagement ends. It should also carve out information the contractor is required to disclose by law, so the clause is not breached by a lawful obligation. For a contractor who works for several of your competitors at once, the confidentiality clause is often more important than the work itself.
Liability, indemnities and insurance
The liability clause allocates risk if the services are defective or cause loss. A well-drafted agreement will require the contractor to indemnify you against claims arising from their services, and to hold appropriate insurance. It should also state what each party's liability is capped at, and whether either party is liable for consequential losses, which are the indirect losses that flow from a breach, such as lost profits or business interruption.
This is the clause where the other side will push hardest, so watch the balance. The contractor will want a cap on their liability, often limited to the fees paid under the agreement, and will try to exclude consequential loss. You will want the indemnity to cover third-party claims against you and to be backed by insurance. A sensible compromise usually caps liability at the contract value while leaving the indemnity for third-party claims uncapped.
- Indemnity: the contractor indemnifies you for claims arising from their services, including claims by their own staff or subcontractors.
- Cap on liability: agree a ceiling, commonly the total fees paid, rather than leaving liability open-ended.
- Consequential loss: decide expressly whether either party can claim indirect losses; leaving it silent invites argument.
- Insurance: require the contractor to hold public liability and, where relevant, professional indemnity insurance, and to give you certificates of currency.
- Workers compensation: in some states and industries a contractor is treated as a worker for workers' compensation purposes, so check the position in your jurisdiction rather than assuming the contractor's own cover is enough.
Restraints on the contractor
If the contractor will work closely with your clients or staff, consider a restraint clause. The two that most commonly matter are non-solicitation of your clients and non-solicitation of your employees: the contractor should not poach the customers they met through you, or the staff they worked alongside, for a reasonable period after the engagement ends.
Restraints are enforceable only to the extent they protect a legitimate business interest and go no further than is reasonable to protect it. A restraint that is too wide in duration, geography or scope is likely to be struck down entirely, so draft the shortest and narrowest restraint that does the job. What is reasonable depends on the industry, the seniority of the contractor and the sensitivity of the information they hold, which is why this clause is a strong candidate for legal review rather than a fill-in-the-blank template.
Clauses to add when the situation calls for them
These are not essential in every agreement, but each becomes important in a particular set of circumstances:
- Back-to-back or head contract terms: include when you have won a client contract and are engaging the contractor to perform the work under it. The agreement should flow down the client's obligations, warranties and deadlines to the contractor so you are not left in breach of the head contract.
- Privacy and data handling: include when the contractor will handle personal information. Require them to comply with the Privacy Act 1988 (Cth) and the Australian Privacy Principles, and to only use the data for your purposes.
- Dispute resolution: include for ongoing or high-value relationships. An escalation clause with a mediation step is cheaper than going straight to court, and it keeps the relationship workable.
- Force majeure or suspension: include for long projects where a delay outside either party's control could derail the timeline and the question of who pays for the delay needs an answer.
- Non-exclusivity: include when you want the contractor free to take other clients, or conversely when you are paying a retainer to secure their availability.
How Artificer Legal can help with your contractor agreement
A contractor agreement looks simple, but the clauses above interact with a patchwork of statutes that change frequently. An Artificer Legal practitioner reviewing your agreement would start with the status risk, because it is the highest-stakes issue: we would read the contract alongside how the work actually happens and flag anything that points to employment under the s 15AA test, including the sham contracting exposure. We would then work through the commercial clauses in order: the scope and payment terms first, because they drive disputes, then the liability cap and indemnity balance, then the intellectual property assignment and moral rights consents, then the restraints.
We would also check the surrounding law that most businesses never see. Since August 2024, an independent contractor whose annual earnings fall below the contractor high income threshold can apply to the Fair Work Commission to have an unfair term in their services contract struck out under Part 3A-5 of the Fair Work Act 2009 (Cth). Separately, if your agreement is a standard form contract with a small business, an unfair term can be void under s 23 of the Australian Consumer Law (Schedule 2 of the Competition and Consumer Act 2010 (Cth)), and since November 2023 proposing such a term can attract a penalty. Both regimes reward getting the drafting right at the start rather than defending it later.
Why the status clause decides whether the agreement holds up
Every clause in a contractor agreement is drafted on top of one assumption: that the person is genuinely an independent contractor. The status clause is the one that makes or breaks that assumption, and it is the most misdrafted line in the document, because businesses treat it as boilerplate while the surrounding clauses quietly describe an employment relationship. Under the s 15AA test, a court or the Fair Work Commission will weigh the real substance of the relationship, including how the contract is performed in practice, and if that substance is employment, the agreement will not protect you: entitlements can be claimed and the sham contracting provisions can bite. The contract cannot manufacture status by assertion, but careful drafting of control, exclusivity, risk and payment can keep a genuine contracting relationship on the right side of the line, and careless drafting can push a real one over it.
The practical point to take away is that an independent contractor agreement is a commercial document with statutory consequences. Set the scope precisely, deal expressly with superannuation for labour contractors, assign the intellectual property in writing, balance the liability and indemnity provisions, and keep the working relationship consistent with the label. If the agreement matches the reality, it will do its job; if it does not, no clause will save it. A lawyer's review at the drafting stage is cheap compared with the cost of defending a misclassification claim, and it is the difference between an agreement that holds up and one that fails at the moment you need it.
Artificer Legal can review or draft your independent contractor agreement, work through the status risk, and make sure the clauses match the way your business actually engages contractors.