This is a very important question to answer for both employers and employees. If you get it wrong, you can run into serious problems later (and not just payroll ones). Getting it wrong could mean anything from tax issues to legal action if employer and employee aren’t on the same page.
Here’s what you need to know
You are probably an employee if:
The intention of either employer or employee is to form an employment relationship
This relationship is reflected in your contract
Your employer controls your hours worked
Your employer has the power to hire and fire you
Your employer deducts ACC payments and PAYE tax from payroll
Your employer supplies materials for work
Your employer owns or leases equipment required
You are bound to one employer at a time and are expected not to compete or offer your skills to competitors
You are probably a contractor if:
The intentions of both parties is to form a contract and not an employment relationship
You control the hours you work
Payment of wages is made in a lump sum at the end of a job, or in instalments as progress is made
You can choose who does the job and can hire people without approval from the other party
You pay any tax, ACC levies and insurance directly
You can make a profit or suffer a loss directly
You supply equipment or materials
You are free to accept similar work from a number of sources at a time
Still in doubt?
If there’s any doubt, it is best to seek advice from the IRD or Department of Labour on your particular situation, and remember that a proper employment relationship where you are entitled to leave is likely to be the safer of the too options.