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Contractor versus Employee

Employees and contractors have different rights and responsibilities.

You need to know whether you’re an employee or a contractor because your rights and responsibilities will be very different.

Health and safety laws apply to employees and contractors.


Employee - An employee is a person employed to do any work for hire or reward under a contract of services (commonly called an employment agreement). The hire or reward is almost always a wage or salary.

Employees have all minimum employment rights under employment laws (eg the Employment Relations Act 2000, Minimum Wage Act 1983 and the Holidays Act 2003), eg:

  • at least the minimum wage,

  • holiday and leave entitlements, and

  • a written employment agreement.

Employees also have extra rights, like the right to take a personal grievance.

The employer must keep employee records such as their employees’ employment agreement, and wage, time, and holidays and leave records.

Contractors - Self-employed people are sometimes referred to as contractors, or independent contractors; these terms mean the same thing. A contractor is engaged by a principal (the other party) to perform services under a contract for services (commonly called an independent contractor agreement).

Contractors are self-employed and earn income by invoicing the principal for their services. A contractor pays their own tax and ACC levies.

Contractors aren’t covered by most employment-related laws. This means they don’t get things like annual leave or sick leave, they can’t bring personal grievances, they have to pay their own tax, and general civil law determines most of their rights and responsibilities. Businesses don’t have to hold contractor records.

Legal tests

To make the correct decision you must focus on the real nature of the working relationship not just the label the parties are calling it. The courts have developed some legal tests to help you tell the difference, they are:

  • Intention test

  • Control vs independence test

  • Integration test

  • Fundamental/economic reality test

You need to think about your situation and apply all the tests to help you to decide. No one test will give you the correct answer. If you are still unsure after you’ve applied the tests, Employment Mediation Services can help you decide the real nature of your relationship, or you should seek legal advice.

Check out more info here


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