Construction runs on subcontracting, and a meaningful share of labour-only arrangements would previously have been difficult to defend as genuine contracting. The Employment Relations Amendment Act 2026 gives a route to certainty — if the arrangement actually meets the criteria.
The five criteria, applied to construction
All five must be met for a worker to be a “specified contractor” protected from an employment status claim:
1. Written agreement specifying independent contractor status. Common gap in construction, where arrangements frequently start with a phone call and continue for years.
2. Not restricted from working for others, except while actually performing your work. This is where labour-only subcontracting most often fails — a subcontractor who works exclusively for one builder, whether by clause or by expectation, is outside the gateway.
3. Not required to be available at set times, or able to subcontract. An either/or. If you need someone on site at 7am, they need a genuine right to send a competent substitute.
4. Declining work does not end the arrangement. If your practice is to stop offering work to subbies who decline, that practice takes you outside the gateway regardless of the paperwork.
5. Reasonable opportunity for independent advice before signing. Record that you gave it.
What to change
- Get agreements in writing for every subcontractor, including long-standing ones.
- Remove exclusivity clauses unless you have a specific reason, and check your actual practice matches.
- Include a genuine right of substitution where you need set attendance times — and honour it when used, subject to the substitute holding the necessary licence.
- Stop penalising refusal. If declining a job affects future offers, you do not meet criterion four.
- Send the agreement in advance with a recommendation to take advice, and allow real time.
What the gateway does not protect you from
This is the part that matters most in construction, and it is easy to misread.
Health and safety duties do not turn on employment status. Where more than one PCBU has a duty in relation to the same matter, each must consult, cooperate and coordinate so far as reasonably practicable. A principal retains duties for work it influences — including through the rates and programmes it sets.
You cannot contract out of a duty by engaging a subcontractor, and the gateway does not change that. After a serious incident the inquiry examines scheduling, rates, whether the work could be done safely in the time allowed, and whether the subcontractor could realistically decline.
Tax treatment is separate. Schedular payment withholding applies to certain contractor payments in construction contexts, with its own rules. Meeting the gateway does not answer the tax question.
Licensing obligations are unaffected. Restricted building work must be carried out or supervised by a Licensed Building Practitioner in the relevant class, whatever the contractual arrangement.
The Construction Contracts Act still applies
Independent of employment status, the payment regime governs your commercial relationship with subcontractors:
- A compliant payment claim obliges the payer to respond with a payment schedule within the required timeframe, and failure to respond generally makes the claimed amount payable in full.
- Retention money must be held on trust in a separate account, and subcontractors are entitled to information about where theirs is held.
- Adjudication is available for disputes, on a fast timetable with binding determination.
These override contrary contractual arrangements and are not affected by the gateway.
If the arrangement is really employment
Where you cannot meet the gateway criteria and the substance is employment, the answer is to employ the person rather than to paper over it.
Retrospective liability for misclassification is calculated across the whole relationship — PAYE with interest, holiday pay on gross earnings, sick leave and public holidays, KiwiSaver employer contributions, and minimum wage shortfall in any period. Over several years the numbers are substantial.
Given apprentice numbers are more than 30 percent below their 2022 peak and skilled trades remain scarce, employing directly and training also addresses a capability problem that subcontracting does not.
Employment New Zealand publishes guidance on employment status, MBIE publishes Construction Contracts Act material at building.govt.nz, and the Act is available free at legislation.govt.nz.
Act in force 21 February 2026. General information only, not legal advice.
