Businesses engaging contractors face three distinct regimes, and meeting one does not satisfy the others. A review should work through each.
1. Employment status: the gateway test
Under the Employment Relations Amendment Act 2026, in force since 21 February 2026, a worker is a “specified contractor” protected from an employment status claim where all five criteria are met:
- A written agreement specifying independent contractor status.
- Not restricted from working for others, except while actually performing your work.
- Not required to be available at set times, or able to subcontract.
- The arrangement does not end solely because they decline additional work.
- Reasonable opportunity to take independent advice before entering into it.
Check your agreements and your practice against each. Criterion four in particular concerns how the arrangement actually operates, not what the document says.
Where you cannot meet all five, the traditional substance test applies — control, integration, economic reality, ability to work for others, equipment, substitution.
2. Tax: withholding and schedular payments
A separate question with its own rules.
Certain contractor payments are subject to schedular payment withholding tax, including in some construction contexts. Meeting the employment gateway does not answer this.
For non-resident contractors, withholding may apply to services performed in New Zealand. Budget 2026 proposed a single-payer approach, meaning a business would only need to consider its own contract rather than the contractor’s wider New Zealand activity — a genuine compliance reduction, though it remains subject to legislation.
Getting withholding wrong creates an arrears position for the payer, not the contractor.
Note also that Budget 2026 increased Inland Revenue’s compliance and collection funding by a further $15 million per annum, and contractor classification is a known focus area.
3. Health and safety: duties do not turn on status
The most commonly misunderstood point. Meeting the gateway does not reduce your health and safety obligations at all.
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 business that influences how work is done — through scheduling, rates, access, or the systems used — holds duties toward the person doing it.
Practical requirements: induct contractors on your actual hazards, verify competence and any required licensing, and do not set rates or programmes that make safe completion impossible.
What the agreement should contain
- Independent contractor status stated, with the gateway criteria reflected in the operative terms.
- Scope of work defined by outcome rather than by hours where possible.
- Right of substitution, if you need attendance at set times.
- No exclusivity, unless there is a specific and defensible reason.
- Payment terms, against invoices for defined work rather than timesheets.
- Insurance requirements — public liability, professional indemnity where advice is given, and evidence of currency.
- Intellectual property assignment, in writing. Work by a contractor frequently belongs to the contractor unless the agreement says otherwise, and assignment must be written to be effective.
- Confidentiality and data handling obligations.
- Health and safety cooperation obligations.
- Termination, and what happens to work in progress.
The IP point is worth emphasising
Businesses regularly pay for software, designs, content or drawings and discover they do not own them. The default position for contractor-created work is that the contractor owns the copyright.
Get assignment in writing, before the work starts. Retrofitting it after a relationship has ended is difficult and sometimes impossible.
Review the practice, not just the paper
The gateway criteria and the substance test both look at how the arrangement operates. A well-drafted agreement that describes an arrangement you do not actually follow provides less protection than it appears to.
If your practice is to require exclusivity informally, to expect availability, or to stop offering work to those who decline, the document does not cure it.
Employment New Zealand publishes guidance on employment status, Inland Revenue publishes material on schedular payments and non-resident contractors, and WorkSafe publishes guidance on overlapping duties. All free.
Act in force 21 February 2026. Budget 2026 measures remain subject to legislation. General information only, not legal or tax advice.
