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Is your new team member a Contractor or an Employee?

If you get it wrong as an Employer, it can get expensive! You can be held liable for payment for Leave (back-dated) and could run the risk of dealing with a personal grievance. This could result in substantial compensation for lost wages and humiliation the Employee may have endured.  It is vital that as an Employer you consider the factors that determine whether an individual is an Employee or a Contractor.

  • How will the individual be paid?
    • Contractors are paid on invoice (ie: not a wage) and have their own responsibility for their independent business’ costs and taxes (GST, ACC, tax returns etc…)
    • How will they work?
      • Contractors can work for more than one business and have the freedom to choose what, where, when and how they complete the work
      • What is the intention and what will be the conduct of both parties?

Quick check box for reference…

Despite these differing factors the lines between Contractor and individual Employee can become blurred over time. Best practice, as an Employer is to regularly evaluate the degree of control you have over the individual. The more control you have, the more likely the individual is deemed an Employee.

If the individual has set work hours, is required to attend meetings and trainings, has set break times and are performing a service integral to your business – then they are likely to be defined as an Employee.

Safeguard that the relationship doesn’t transform over time or if it does – reassess and ensure the relevant written agreement is put in place and becomes effective at the time.

If you have any doubts or questions feel free to contact People Passion 09 299 2525


Claire | People Guru

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