Employee or contractor: the gateway test and what it means
An employee works under an employment agreement, a contract of service, and has the protections of employment law, such as paid leave, the minimum wage and the right to raise a personal grievance. A contractor is in business on their own account under a contract for services, and has none of those. Since 21 February 2026, a gateway test in section 6 of the Employment Relations Act 2000 can settle which you are.
The gateway test
Section 6 now excludes a "specified contractor" from the meaning of employee. You are one if all of these are true:
- a written agreement says you are an independent contractor, or not an employee;
- you are not restricted from working for others, except while you are doing this work;
- you either do not have to work, or be available, at set times or days or for a minimum period, or you may subcontract the work, with any vetting of the subcontractor limited to legal requirements or, where the work justifies it, a relevant qualification or criminal record check;
- the arrangement cannot be ended because you turn down extra work beyond what you agreed to do;
- you had a reasonable opportunity to get independent advice before you entered it.
If every condition is met, you are a contractor for the purposes of the Act. If any one is missing, the older question applies: the Employment Relations Authority or the Employment Court looks at the real nature of the relationship, and what the agreement calls you does not decide it. Employment New Zealand describes four tests the courts use: what the parties intended, how much control you have over your work, how far you are part of the business, and the economic reality, such as whether you carry the financial risk and can profit from the work.
Arrangements that started before 21 February 2026
The gateway test is not retrospective. For a contractor arrangement that began earlier, Employment New Zealand says the common law test applies to the time before 21 February 2026, and both tests from that date.
The Act's transition rule adds one thing. If an older arrangement meets the gateway test, you are a specified contractor from 21 February 2026 onwards, unless a case about your status had already been brought before then. The Authority could still find you were an employee for the time before that date, so the answer can differ either side of it.
What the difference means
Leave and pay. The Holidays Act uses the same meaning of employee, so a contractor has no statutory annual holidays, sick, bereavement or family violence leave, and no time and a half or day in lieu for a public holiday unless agreed. There is no minimum wage either.
Tax. An employee's employer deducts PAYE tax and ACC from each pay and pays them on the employee's behalf. A contractor generally pays their own tax to Inland Revenue. Many are paid schedular payments, for work mainly involving the supply of labour, with tax deducted at the rate they give the payer on an IR330C; a rate they choose themselves must be at least 10%, or 15% for a non-resident on a temporary visa. With no IR330C, the payer deducts 45%. A contractor whose turnover was at least $60,000 in the last 12 months, or is expected to be in the next 12, must register for GST.
ACC and KiwiSaver. A contractor pays their own ACC levies. Someone wrongly treated as a contractor may miss out on the KiwiSaver employer contribution, and pay tax and ACC they should not have.
Personal grievances. Only employees can raise one. A contractor's rights come mostly from the contract and general civil law, though health and safety law protects both.
All of that has a price. Our article on how much more a contract rate should be works through it, and contracting as a career covers the life that goes with it.
Before you sign, and if you disagree
Read a contractor agreement against the five conditions before you sign it. The chance to take independent advice is itself one of them, so take it. If the agreement says you are a contractor but the client sets your hours, supplies your tools and stops you working elsewhere, ask why.
If you and the business disagree about your status, Employment New Zealand (0800 20 90 20) can help, and mediation or an application to the Authority, which charges a fee, follows. A union or a labour inspector can also ask the Employment Court to declare whether someone is an employee.
A contract rate has to beat what the permanent role would put in your hand. Enter the permanent salary in the Offer Comparer to see that figure after PAYE, ACC and KiwiSaver, with no account. In Everything mode, each job you save in jobtracker.co.nz keeps its contract type, such as permanent, fixed term, contract or casual, beside its pay.
Weigh contract and permanent roles side by side
On the Move keeps every role you weigh up, permanent or contract, with its pay and your notes, next to Your Career for the job you have now; create an account and choose On the Move, and the first 7 days are free, with nothing charged if you cancel before then. If you would rather look around first, the demo opens a full job hunt with no account.
Create your accountA card is needed to start the trial, and there is one free trial per person and per card.
Sources
- Employment New Zealand: employee or contractor?
- Employment Relations Act 2000 (version as at 10 July 2026): s 6 and Schedule 1AA, clause 27.
- Holidays Act 2003 (version as at 20 December 2023): s 5.
- Inland Revenue: schedular payments.
- Inland Revenue: work out and declare my tax rate for schedular payments.
- Inland Revenue: deductions from payments to contractors.
- Inland Revenue: registering for GST.