It is important to know the difference between employees and
contractors because each type of worker has their own legal rights and
What are the differences?
An employee is a person employed to do any work for ‘hire or reward’ under a contract of services (commonly called an Employment Agreement). ‘Hire or reward’ is almost always a wage or salary but can also be work in exchange for accommodation or board.
Under New Zealand employment law, all employees are entitled to minimum rights such as being paid at least the minimum wage, getting rest and meal breaks and having annual and public holidays. Employees also have extra rights, like the right to raise a personal grievance.
Contractors or independent contractors are self-employed and engaged by a principal (the other party) to perform services under a contract for services (commonly called an Independent Contractor Agreement). Contractors earn income by invoicing the principal for their services.
A contractor pays their own taxes and ACC levies. Contractors are not covered by most employment-related laws. This means they don’t get things like annual leave or sick leave and they can’t raise personal grievances.
The courts have developed some legal tests to determine whether certain workers are employees or contractors.
Find out more about tests to distinguish contractors from employees.