Posted on: Apr 13, 2016

Employees and contractors have different rights and obligations under the employment legislation.  It is common that the distinction between an employee and contractor gets confused.

The Labour Inspectorate, part of the Ministry of Business, Innovation and Employment (MBIE) has released a new guide for workers and employers that summarises the difference between employees and independent contractors. It explains how to recognise the two different types of relationship and the entitlements and obligations that each imposes.

Incorrect categorisation can lead to employers being liable for unpaid PAYE and holiday pay (where they believe a worker is a contractor but they are actually an employee) or employees (who the employer believes to be contractors) overpaying taxes and missing out on statutory rights.

Employers also face the risk of a contractor bringing a personal grievance, for example if the contract is terminated and the contractor can establish that the true nature of the relationship was that of an employee/employer, then he/she may be successful in a claim for unjustified dismissal.

The tool provides a simple tick sheet that provides visual guidance on the most appropriate categorisation (employee or contractor) in accordance with a range of determining factors (the common ‘tests’), as well as general information on the rights and obligations of each category of worker.

To access the MBIE tool click here



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This article, and any information contained on our website is necessarily brief and general in nature, and should not be substituted for professional advice. You should always seek professional advice before taking any action in relation to the matters addressed.