Employee vs Contractor

There is no black and white answer when deciding if someone is an employee or contractor, just several shades of grey.

In a dispute, the Employment Court applies complex legal tests to determine the 'real nature of the relationship', and their decision can have significant financial implications if you have incorrectly treated an employee as a contractor.

Employees generally work a specified number of hours each week, at prescribed times, for a standard hourly wage or salary (sometimes with overtime allowances). An employment contract usually prevents them working for anyone else. Most importantly, they are protected by the Employment Relations Act and Holidays Act.

Contractors, meanwhile, are self-employed, are not entitled to sick leave or holidays and the Employment Relations Act does not apply. Contractors have significantly fewer rights in a dispute situation, and can generally be dismissed for just about any reason. In return for this added risk they have more flexibility in their work, and may be paid a higher rate. They often bring their own tools, and pay for their own training. They can usually choose their hours, work for several businesses at once, and are able to hire (subcontract) someone else to work with, for, or instead of them. Under most contracts they don't get paid until the work is done to a set standard.

Making the wrong call could be costly to your business. To assist you in deciding whether you and your workers are in an employment or contracting relationship please contact us.