Call Us 0800 10 10 38

Am I a contractor or an employee?

By SmartPayroll | November 14, 2013

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:

  1. The intention of either employer or employee is to form an employment relationship
  2. This relationship is reflected in your contract
  3. Your employer controls your hours worked
  4. Your employer has the power to hire and fire you
  5. Your employer deducts ACC payments and PAYE tax from payroll
  6. Your employer supplies materials for work
  7. Your employer owns or leases equipment required
  8. 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:

  1. The intentions of both parties is to form a contract and not an employment relationship
  2. You control the hours you work
  3. Payment of wages is made in a lump sum at the end of a job, or in instalments as progress is made
  4. You can choose who does the job and can hire people without approval from the other party
  5. You pay any tax, ACC levies and insurance directly
  6. You can make a profit or suffer a loss directly
  7. You supply equipment or materials
  8. 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.