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Contractors vs Employees

Is there an easy solution?

I had a client that was classed as an independent contractor by the company they worked for. My client came to me because they had been let go with no notice and the company they worked for refused to pay the final invoice which was the notice period. Their argument was that they weren't letting the contractor go, but they no longer required them on a regular basis. After reading the emails between the two parties, it was clear that there was agreement that there were to be regular hours and even stated days the contractor was to be onsite and leading other staff members. When we looked at the tests outlined on the Employment Website (https://www.employment.govt.nz... for more details) it came to light that the contractor was more an employee with a contractors agreement. We could have argued that in this case, the contractor was an employee with very blurred contractor obligations - besides the fact that the income the contractor received was noted in the reference of her bank statement as "wages"  we were told it was an administration error. The contractor was part of the team, they had a photo on the company website, and they were even invited to the staff do. So where does the legislation for a contractor end and being an employee start?

This is where business owners get stuck and requires a chat with a suitably qualified HR person, or an Employment Lawyer as each situation is different. Until we are able to see all the information before us can we make any assumptions or give good advice. However there are some basic fundamentals that will help along the way. 

Top 3 tips are: 

1) Have a good contractors agreement in place to define the relationship properly;

2) Ensure that you have the conversations required to clearly outline your intentions of the relationship. This starts before the signing of the contractors agreement and document those conversations (a diary note of 2-3 lines is all that is required or advertising copy to show that you were looking for a contractor); 

3) In your head, make sure that you aren't over stepping what a contractor does within your business. This is a learning step. You need to understand the requirements or have someone who is ensuring you understand the requirements (like me), that you can call to discuss scenarios like this. They will give you some valuable advice. 

Remember - Contractors have freedom of doing the work where ever they like, however they like (as long as they are doing it to your requirements), whenever they like within reason (deadlines are fine). You have the right to audit their work. They must invoice you and the information on the invoice must be clear and concise (do not accept an invoice if it says wages - but that is another story).

As work is becoming more and more fluid and flexible, as an employer and business owner it is going to become more important to understand these differences so that it doesn't land you at mediation or the Employment Relations Authority (ERA). It won't cost you thousands of $$$ and may actually make a difference when you are employing people in your workplace. 

Until the government clarifies any changes in the relationships at work, with conversations starting about a class of worker being a dependent contractors, communication and a good agreement is the vital steps along with good understanding of what you need in your business. HR Consultants are worth their weight in gold, because in the long run, they will reduce the risk of breaching employment rights and responsibilities you have as an employer. 

Before ERA at the moment is a case from Calendar Girls with Dancers contracted as independent contractors. Defining their relationship is the first task for ERA - should they be classed as employees or are they contractors? To read the article follow the link https://www.stuff.co.nz/busine...

Contact me on 021 918 331 for a free confidential conversation on your business needs today!



 

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