This directly affects your visa and immigration prospects! As a work visa holder, are you a contractor or an employee?

Although the pandemic has brought Immigration New Zealand’s processing of work visas and skilled migrant applications largely to a standstill, its operations will gradually return to normal as the general election result approaches.

However, with domestic unemployment continuing to rise, tighter work visa and skilled migration settings will probably be inevitable, at least in the short to medium term. At such a time, work visa holders have even more reason to review their employment relationships and understand their work status, so that it does not affect a work visa renewal or immigration application.

As New Zealand’s economy continues to develop, more businesses are focusing on how to organise and use their workforce more effectively.

This is particularly true now, with an unpredictable external environment and many employers adjusting to new ways of working from home.

What changes when people no longer work in the traditional way?

As online communication and working from home become increasingly common and gradually become the norm, the boundary between work and home is becoming ever more blurred.

These considerations, however, are still largely focused on the future. Lawmaking is usually slow and often lags behind reality.

Under current employment law, workers are still essentially classified as either employees or contractors.

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What is an employee? 

An employee is someone employed to perform work for some form of payment under a contract of service, usually called an employment agreement.

Payment is usually an hourly wage or an annual salary.

Hourly wage or annual salary

An hourly wage is payment an employee receives for each hour worked.

For example, retail assistants and restaurant waiting staff are usually paid according to the hours they work.

An annual salary is a fixed amount paid at the same rate regardless of the actual number of hours worked.

For example, office clerks are usually paid an annual salary.

Rights and restrictions

Under employment legislation, such as the Employment Relations Act 2000, the Minimum Wage Act 1983 and the Holidays Act 2003, employees have all basic employment rights, including:

• Receiving at least the minimum wage;
• Receiving paid holidays and annual leave;
• Having a written employment agreement;
• Not being dismissed unless the employment agreement provides for it.

Employees also have other rights, such as the right to raise a personal grievance over an employer’s breach of employment law.

In New Zealand, employers pay tax on employees’ behalf, including pay as you earn (PAYE) tax and ACC levies.

Employers must keep employee records, including employment agreements and records of pay, hours, holidays and leave.

These are all significant advantages for employees.

However, employees also face certain restrictions. For example, they must:

• Follow the company’s culture and their supervisor’s reasonable instructions;
• Work the hours for which they are paid;
• Comply with the employer’s confidentiality and trade secret requirements;
• Follow company rules on telephone and internet use;
• Meet the relevant employment requirements in their employment agreement or risk dismissal.

What is a contractor? 

Self-employed people are sometimes described as contract workers, contractors or freelancers. These terms generally mean the same thing and are collectively referred to here as contractors.

Contractors are usually engaged by a contracting party, or client, to provide services under a contract for services known as an independent contractor agreement. They typically have the following characteristics:

• They can work for several different clients at the same time.
• They can generally work to their own schedule and have greater freedom.
• Arriving late for work will generally have no negative consequences, because they are their own boss.

They are self-employed and receive payment for their services by invoicing clients.

• They must pay their own tax and ACC levies.
• More successful contractors may also hire other people to work for them, becoming business employers themselves.

Contractors may include:

• Tradespeople who charge by the job, such as electricians or plumbers;
• Designers providing design services to clients;
• People providing temporary cover in emergencies or at irregular times.

How contractors differ from employees

Contractors are generally not protected by employment-related legislation.

This means they are not entitled to benefits such as annual leave or sick leave, cannot raise a personal grievance, and businesses do not have to keep their work records.

Correspondingly, of course, contractors face fewer restrictions in their work.

Confusing the two can have serious consequences

For workers themselves, being a contractor may affect a work visa application. For example, contractors cannot apply for an employer-specific work visa.

For details of how work visa application requirements differ for contractors and employees, please refer to (insert the link to the article dated 30 April 2019.

Check whether it is a magazine article; if so, use the article’s QR code here, then link to the WeChat article below this piece.) 

• Unpaid PAYE tax;
• Unpaid minimum wages;
• Holiday and leave entitlements not provided;
• Penalties for breaching employment law.

Inland Revenue and the Department of Labour are primarily responsible for these matters in New Zealand.

If an employer has an adverse record, Immigration New Zealand will also intervene and blacklist them, preventing them from supporting work visa applications for overseas workers.

Understand your employment relationship

Because employment relationships affect migrants’ work status, clarifying and resolving issues promptly can prevent considerable unnecessary trouble later.

So how can you establish your employment relationship?

Use the definitions and characteristics of employees and contractors outlined above to examine your working relationships carefully.

Have you signed an employment agreement? Do you receive holiday pay and overtime pay? What happens if you arrive late for work? Are you free to work for others? Who is responsible for paying your tax?

If you are still unsure or unclear, seek legal advice.

About the author

Sonny Lam

With more than a decade of litigation experience and a background as an immigration officer at Immigration New Zealand, he now practises as an immigration lawyer at Forest Harrison Lawyers. After leaving Immigration New Zealand in 2015, he began specialising in immigration, bringing a distinctive perspective to technical immigration issues and the effective preparation of immigration applications, and offering sound professional advice from the perspectives of both applicants and the immigration officers assessing their cases.