is that team member an employee
or a contractor in this video i'll show you how you can tell the difference between the two
now this is important because getting it wrong can sometimes be a very expensive mistake
the employment court has recently issued warnings to employers who have tried to label
their employees contractors in a deliberate effort to avoid employment obligations
to employees deliberate is one thing but others have made this mistake quite unintentionally
now if you do make this error your business could be liable for unpaid paye and holiday pay as well
as potentially being penalized by inland revenue and possibly fined
employees are better protected than contractors but they also have fewer options yes they're
eligible for kiwisaver paye taxes paid on their behalf and they are unable to be fired without
following the proper procedures now contractors on the other hand have fewer safeguards and
but more discretion than employees they're responsible for their own gst their own taxes
they're not paid for holidays sick days parental leave and depending on the small print their
contracts can often be ended with little or no warning but employees and contractors of
course are equally subject to health and safety regulations so that doesn't change
an employee is a person who is hired or compensated to perform
work under a contract of service commonly called an employment agreement almost
always the hire or reward is a wage or salary now all employees have employment rights under
employment laws now these rights include at the very least the minimum wage holiday and leave
entitlements and a written employment agreement and the employer must keep employee records
showing these entitlements are available and are being fulfilled
contractors or independent contractors is simply terminology to use to describe self-employed
people both terms signify and mean the same thing and principle that's the hirer hires a contractor
to deliver services under a contract for service now that contract for service is commonly called
an independent contractor agreement contractors work for themselves and make money by billing
the hirer for their services contractors are then responsible for their own taxes and acc levies etc
most employment related laws do not apply to contractors now this implies they're not
entitled to yearly or annual sick leave cannot file personal grievances must pay their own taxes
and the majority of their rights and responsibilities are governed by general civil
law not employment law now businesses don't have to keep any contractor records
there are some important distinctions between an employee and a contractor
now to make the best decision as to which is which you must consider the true nature of
the working relationship not just the name that you would give it now the courts have devised
some legal tests to guide you in determining the difference now these legal tests are as follows
the intention test the party's intentions for the engagement are important as is the
wording in the party's written agreement as this generally reveals what their true intentions are
the control versus independence test the more control another person has over someone's work
hours procedures the more likely he or she is an employee contractors are more likely to have more
freedom in terms of who they work for where they work when they work the tools they use
and so on the integration test now this test determines if the person's work is critical
to the employer's operations and whether they are part and parcel of the organization now typically
a contractor's work is simply a small part of the overall operation a person is more likely to be
considered an employee of the organization if the work is the of the type that is commonly done by
employees if it's continuous in other words not a one-off project and if a contractor status is
for the benefit of the business only rather than for the worker fundamental economic reality test
that's a mouthful but the test entails assessing the overall state of the working relationship a
contractor is a person who runs their own business and also works for more than one business so you
need to think about your situation and apply all those tests to help you decide now no one test
will give you the correct answer as always it's important that you get the right advice
and i strongly suggest you talk to an employment specialist if you have any concerns around staff
as employees or contractors they can help you make sound decisions in the best interest of you
and your business now if you want to know more have a look at this video here hit
that subscribe button thanks again for watching until next time see you then