In October of 2017, New Zealand moved to a coalition government with Jacinda Ardern elected as the world’s youngest head of government. With a fresh and bold stance on many topics, Ardern has led New Zealand to several big changes, including certain employment rights. One of the main changes that is being proposed to employment law in NZ is changes to contractor law. To help you wrap your head around these changes, we’ve broken contractor law down by definition, who the proposed changes effect and how, and what it means for you as an employee or as an employer. We’ll even compare another country to NZ to see what is happening out there in the world. Ready?
A contractor defined
According to the NZ government employment page, a contractor is “…engaged by a principal (the other party) to perform services under a contract for services (commonly called an independent contractor agreement). (Source here). If you’re not super familiar with employment law, that definition can sound a whole lot like a regular employee. After all, an employee typically signs a contract to perform services for an employer.
But, one of the main differences between a contract and an employee is that contractors are often self-employed, and therefore aren’t covered under a lot of the basic rights and laws that employees are. For example, contractors don’t accrue annual leave, and they can’t take up a personal grievance. Employees are always guaranteed a minimum wage, accrue different types of leave, and their taxes are taken automatically.
If you’re still wondering where you fall as a contractor or employee, or if you think you’ve been classified wrong, you can turn to employee mediation services here, or your own legal advice to pursue a resolution.
If you’re a contractor
The biggest possible change you’ll experience is if the government agrees to implement legal protections for you. Essentially, the government is looking at changing the definition of a contractor, which we just went through above. If you have contracts with multiple clients, you would still be considered a contractor. However, if you are under contract with only one client, you may be reclassified to an employee. This is huge for many contractors out there who take on rolling contracts with the same employer. Suddenly, you would be eligible for basic employment rights, like annual leave or sick leave, which is a massive benefit.
If you’re an employer who uses contractors
Now might be a good time to be overly cautious and run some internal audits on your contractors. The reason we stress this is because you could be owing some serious cash to contractors who were wrongly classified and actually meet the definition of employee. If found true, you’d likely owe things like annual leave back to when the employee first started working with you, on top of potential fines.
One important thing to note is that even if you have a contract stipulating the terms of the contracted employee, this will not necessarily hold up in court. Again, if your contractor is found to be a true employee, your contract is nullified, as it was wrong in the first place.
An area to audit quite closely is your contractors who have less autonomy. For example, if your contractor is required to work certain hours, has a contract that states they must be employed for a specific amount of time, or other ways that restrict their freedom, these may eventually be defined as a dependent contractor. This group of people is one the government is taking steps to look into and may make changes to, and will likely positively benefit the group.
Who it affects
So who do we mean when we talk about employers? Think about large industries that would primarily have contractors. Can’t think of one? Try Uber, a perfect example. Uber drivers typically don’t make minimum wage in NZ or in many other countries, but aren’t required to as of yet. Many Uber drivers are using the job as a supplement to their main income, however, which would mean they would continue to be classified as a contractor. Alternatively, it’s possible that if Uber is your main occupation, you could be reclassified.
Companies that employ migrant workers, or other vulnerable workers, may be looked at especially closely going forward. This is because it is often easier to take advantage of vulnerable workers, and classify them as contractors to save money and time. Vulnerable workers will often not understand employment law, and may take the job regardless of the conditions. For this reason, companies like cleaning companies, taxi companies and catering companies, for example, should take special care in an audit.
How other countries compare
One notable country that has already addressed this problem is the United Kingdom. The UK has another class of employee called a worker. A worker has limited rights, but is still entitled to things like minimum wage, paid holiday, and protections against discrimination. NZ’s possible definition of dependent contracts falls approximately into the worker definition, and may be where NZ is heading with contractor law. Regardless of how NZ proceeds with defining contractors, they will likely find challenges in the more grey areas of contractors.
Essentially, if you’re a business who has any type of contractors under your payroll, these changes will affect you. Likewise, if you’re a contractor, you may be looking at changes to your contract and employment status. Now is a perfect time to start looking into it, before changes are put into law, and you have the opportunity to fix any glaring issues. Whatever is decided will take some time, but it’s important that you as a company protects and advocates for all of your employees, and that you as a contractor understand your rights and employment status.