Are they an employee or contractor? EBI Business Improvement Specialists
Understanding the new rules on classifying workers and contractors is essential.
Many businesses prefer contractors because they offer flexibility, reduce overhead costs, and eliminate obligations like leave entitlements and KiwiSaver contributions. Messing this up means lawsuits, unexpected bills, and a bad reputation. Do it right, and you’ll stay compliant, avoid disputes, and treat workers fairly.
Director & Partner
Recent changes to New Zealand’s Employment Relations Act make it clearer than ever: getting worker classification right is crucial. Misclassifying employees as contractors can cost businesses big time in fines and back pay. So, how do you get it right?
Key questions to ask:
- Who’s in control? If you dictate when, where, and how work is done, they’re likely an employee.
- Are they part of the team? If they’re essential to daily operations, they’re probably not a contractor.
- Who takes the financial risk? Employees get wages and benefits, while contractors manage their own expenses.
- Who provides the tools? If you supply the equipment, they’re more likely an employee.
Why it matters
Getting this wrong means legal trouble, unexpected costs, and potential damage to your business’s reputation. On the flip side, proper classification keeps your business compliant, avoids disputes, and ensures fairness for workers.
Flexibility for a business and workers is increasingly a requirement, these new rules help balance flexibility with worker protection. If you’re unsure, review contracts, get expert advice, and be upfront with workers. A little caution now can save you major headaches down the track. Are you better off with employees or contractors? For a no-obligation chat about what’s best for your business, contact us to explore the pros and cons of employees versus contractors and find the right fit for your workforce.
