Contractor vs Employee NZ: Understanding the Differences
As a business owner in New Zealand, you may be faced with the decision to hire a contractor or an employee for a specific job. But before you make a choice, it`s important to understand the differences between the two types of workers.
Contractors are self-employed individuals, who usually work on a short-term basis and are paid for their services according to a contract. On the other hand, employees are hired by the company and work under the direction and control of the employer.
Here are some of the key differences between contractors and employees in New Zealand:
1. Tax and ACC Levies
One of the main differences between contractors and employees is how they are taxed. Contractors are responsible for paying their own taxes and ACC levies. While employees have their taxes and ACC levies deducted from their wages by the employer.
2. Hours of Work
Employees usually have set hours of work and must work these hours as agreed upon with the employer. While contractors have more flexibility in the hours they work. They can negotiate their own working hours with the company and have the freedom to work outside of these hours if they choose.
3. Leave Entitlements
Employees are entitled to paid leave such as annual leave, sick leave, and public holidays. While contractors are not entitled to these benefits as they are self-employed and responsible for their own time off.
4. Control and Direction
Employees work under the direction and control of the employer. They are given tasks by the employer and must complete those tasks within a certain time frame. While contractors are hired to provide a specific service and have more control over how that service is provided.
Employers are responsible for providing superannuation contributions for their employees. While contractors are responsible for their own superannuation contributions.
Choosing between a contractor and an employee can be a difficult decision. It`s important to consider the nature of the work that needs to be done and the level of control required. The decision will depend on a number of factors, including the length of the work required, the skills and experience required to complete the job, and the level of control needed over the work.
In summary, the key differences between contractors and employees in New Zealand are tax and ACC levies, hours of work, leave entitlements, control and direction, and superannuation. Understanding these differences will help you make an informed decision about which type of worker is best suited for your business needs.