It is vital that the business owner is clear whether he is dealing with an employee or a contractor, from the outset. The person cannot be both.
Sometimes the arrangement between the business and the worker is informal, and the parties don’t actually discuss this. Lack of clarity can have major tax complications, and could open to the door to an employment dispute.
There have been a number of cases where the relationship between the parties has not been clear and the relationship has then broken down because of some dispute. The ‘worker’ may then claim they have been an ‘employee’.
This is a question for the employment courts to determine. If the business loses, and the worker has been an ‘employee’, substantial tax payments may then have to be paid and compensation to the employee for breaking his employment rights.
Specifically the court can look at all relevant matters, and will not treat the statement that the parties use to describe their relationship as conclusive.
In other words, just because you and the worker decide to call him a contractor, doesn’t mean that the Courts, (and the IRD) will agree that he is one.
Having a signed off Contractors Agreement in place goes a long way to protect the Business.
The contents of the guide Independent Contractors follow;
Introduction
Three basic options
Tax Implications
Tests to establish whether a person is an employee or contractor
Control Test Checklist
Integration Test Checklist
Independent Test Checklist
Intention Test Checklist
Economic Test Checklist
Pre-Employment Checks
Credit Check
Restraint of Trade Clauses
Explanation
Formidable Opposition
An alternative
Confidentiality Agreement
Breach of a Statutory Declaration
Perception is Reality
Model Statutory Declaration
Model Confidentiality Agreement
Model Independent Contractors Agreements
Contractors Agreement for Labour
Contractors Agreement for Services
These two types of Contractor Agreement provided with the guide are in MS Word format (docx) for your own editing as required.
Recently reviewed in June 2023, unsure your business uses the latest compliant contracts to protect your business interests.
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