Employer of Record (EoR) in New Zealand

The New Zealand workforce is made up of various types of workers, each with specific roles and characteristics. The main types of workers include:

Permanent full-time employees in New Zealand

These employees work regular hours and have ongoing employment agreements that do not have an end date. This category of employment is characterised by stability and continuity in terms of employment relationships and benefits.

Most often, the term “full-time” is somewhere between 35 and 40 hours per week. Permanent full-time employees are entitled to the full set of employment benefits and rights under New Zealand law, which includes annual leave, sick leave, and other statutory entitlements.

Permanent part-time employees in New Zealand

These employees also have ongoing employment agreements but work fewer hours than full-time employees on a regular schedule. A permanent part-time employee in New Zealand is an individual who engages in an ongoing employment relationship, working a predetermined and consistent number of hours each week, which is less than those considered full-time.

Despite the reduced hours, permanent part-time employees are provided with the same proportional employment rights and benefits as their full-time counterparts. This includes entitlements such as pro-rata annual leave, sick leave, and other statutory necessities tailored to their part-time hours.

Fixed-term or contract employees in New Zealand

These workers receive employment for a specific term or project completion, with a predetermined termination date. This type of employment agreement has a set duration, which is established at the outset of the employment relationship. The duration could be defined by a specific date, such as the completion of a project or the return of a replacement employee.

When hiring a fixed-term employee, it’s required by New Zealand law that the employment agreement clearly state the reason for the fixed-term arrangement. There must be a genuine reason, based on reasonable grounds, for employing someone on a fixed-term basis rather than offering permanent employment. Additionally, the agreement must specify the way in which the employment will end, such as a specific date, the conclusion of a project, or upon the return of an employee from leave.

Casual employees in New Zealand

They have no guaranteed hours and work on an ‘as-needed’ basis, often with variable hours and pay depending on the work available.

Casual employees, unlike permanent or fixed-term employees, have no expectation of continued employment. They are hired for specific tasks or periods and are only paid for the hours they work. There is no legislative definition of what constitutes a casual employee in New Zealand; however, the characteristic that defines casual employment is the lack of a firm commitment in advance from the employer regarding the duration of the employee’s employment or the days (or hours) the employee will work.

In New Zealand, casual employees enjoy the same employment rights as regular employees, including minimum wage, holiday pay, and rest breaks. They become eligible for sick leave and bereavement leave after six months of consistent employment, where they have worked at least an average of 10 hours a week and at least one hour a week, or 40 hours a month. Despite the casual nature of employment, both parties must adhere to the Employment Relations Act 2000, ensuring fair treatment in the workplace.

Apprentices and trainees in New Zealand

Individuals who are training and learning on the job, possibly through formal apprenticeship programs, can gain qualifications in a trade.

Independent contractors in New Zealand

Often referred to as freelancers or self-employed, independent contractors provide services under a ‘contract for services’ and manage their own tax and ACC levies.

It is beneficial for employers to understand the implications of engaging with independent contractors, including the correct classification of workers, to prevent legal challenges. Ensure contracts for services are clearly defined, outlining the scope of work, delivery expectations, and payment terms, which will safeguard both parties’ interests

Independent contractor agreement in New Zealand

An independent contractor agreement is a legally binding document that outlines the terms and services between a contractor and their client. It specifies the nature of the work to be performed, compensation, contract duration, and other key terms and conditions for service provision. This type of agreement is essential for clarifying the relationship between the parties involved, setting clear expectations, and protecting the rights of both the independent contractor and the client.

The agreement ensures that both parties understand that the contractor will be performing services as a separate entity from the business and not as an employee. This distinction is crucial as it affects taxation, liability, and employment benefits. For instance, independent contractors are responsible for their own tax obligations and do not usually receive the same benefits as employees, such as annual leave or sick leave.

It’s important for independent contractor agreements to be carefully drafted to prevent any “sham contracting” situations where the relationship may, in reality, resemble an employment relationship, invoking different legal responsibilities.

These agreements can typically be customised to suit different kinds of work arrangements, whether the contractor is engaged for a single project or on an ongoing basis. Moreover, they can incorporate clauses pertaining to confidentiality, intellectual property rights, and dispute resolution procedures.

Independent contractor law in New Zealand

Independent contractors operate under a different set of regulations than employees, since they are considered, self-employed individuals providing services under a ‘contract for services’. Here are some key regulations and laws governing independent contractors in New Zealand:

• Tax obligations: Independent contractors are responsible for managing their own tax affairs. If their income exceeds the current threshold of 60,000 NZD per year, they must register for Goods and Services Tax (GST), as well as file their own tax returns.
• Fair Trading Act 1986: Recently, amendments to the Fair-Trading Act 1986 have introduced new rules on how businesses engage with independent contractors. These changes aim to prevent misclassification of contractors and ensure that representations made to them during engagement are not misleading or deceptive.
• Health and Safety at Work Act 2015: Contractors, like all workers in New Zealand, are covered under the Health and Safety at Work Act 2015. They have an obligation to ensure that their work does not harm others and that they maintain a safe working environment.
• ACC levies: Independent contractors are required to pay their own ACC levies, which provide them with coverage under the Accident Compensation Scheme for work-related injuries.