Part Q - The boundary between use of goods and services and employee expenses

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Australian System of Government Finance Statistics: Concepts, Sources and Methods
Reference period


In GFS, employee expenses exclude amounts payable to contractors, self-employed outworkers, and other workers who are not employees of general government or public sector units. Paragraph 6.33 of the IMF GFSM 2014 states that any such amounts should be recorded under use of goods and services (ETF 1233, COFOG-A, SDC). An employer / employee relationship exists when there is a written or oral agreement (which may be formal or informal), between an entity and an individual. This type of relationship is usually entered into on a voluntary basis by both parties, whereby the person works for the enterprise in return for remuneration in cash or in kind. The remuneration is based on either the time spent at work or an other objective indicator of the amount of work performed. If an individual is contracted to produce a single specific task, it suggests that no employer / employee relationship exists, but that a service contract relationship exists between the entity and a self-employed individual.


The primary indicator of whether an employer / employee relationship exists is the presence of control in the relationship. Paragraph 6.34 of the IMF GFSM 2014 indicates that the right to control, or to direct, work performed and how it shall be performed, is a strong indication of an employer / employee relationship. The method of measuring or arranging for the payment is not important as long as the employer has effective control over both the method and the result of the work undertaken by the individual. However, certain control of the work being undertaken may also exist for the purchase of a service, for example when subcontracts are entered into. Therefore, other criteria should also be used to define more clearly the employer / employee relationship. The fact that the individual is solely responsible for social contributions would suggest that the individual is a self-employed service provider. By contrast, payments for employment related superannuation by the employer is an indication of an employer / employee relationship. Entitlement by the individual to the same kind of benefits generally provided to an entity’s employees (e.g., allowances, annual leave, and sick leave) would also indicate an employer / employee relationship. Payment of taxes on the provision of services (such as GST) by the individual is an indication that the individual is a self-employed service provider.


Certain goods and services used by governments do not enter directly into the process of production itself but are consumed by employees working on that process. Paragraph 6.35 of the IMF GFSM 2014 states that when the goods or services are used by employees on their own time and at their own discretion for the direct satisfaction of their needs or wants, they constitute wages and salaries in kind (ETF 1222, COFOGA, SDC). However, when such use is mandatory in order to enable employees to carry out their work, it should be recorded as use of goods and services (ETF 1233, COFOG-A, SDC). Examples of this are:

  • Small tools or equipment (generally inexpensive in nature) used exclusively (or mainly) at work;
  • Clothing or footwear of a kind that ordinary consumers do not choose to purchase or wear and which are worn exclusively (or mainly) at work; for example, protective clothing, overalls, or uniforms;
  • Accommodation services at the place of work of a kind that cannot be used by the households to which the employees belong: barracks, cabins, dormitories, huts, etc.;
  • Special meals or drinks necessitated by exceptional working conditions, while travelling for business reasons, or meals or drinks provided to employees while on active duty;
  • Changing facilities, washrooms, showers, baths, etc., necessitated by the nature of the work; or
  • First aid facilities, medical examinations, or other health checks required because of the nature of the work.


If employees are responsible for purchasing the kinds of goods or services listed above and are subsequently reimbursed by the employer, paragraph 6.36 of the IMF GFSM 2014 states that such reimbursements should be recorded as use of goods and services (ETF 1233, COFOG-A, SDC) rather than as wages and salaries.

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