Hire Contractors In New Zealand

New Zealand's workforce is projected to grow by 1.8% annually, which equates to an additional 47,000 new workers per year. This is a fantastic opportunity for businesses that wish to hire contractors in New Zealand. They can access a large pool of skilled workers who can diversify and enhance their business's productivity.

However, you must also know other nuances for a successful international contractor hiring journey. These include understanding labor laws, maintaining the right classification of workers, complying with unique tax regulations, and so on. 

This article will discuss some of the most commonly faced challenges of hiring independent contractors and contractor outsourcing in New Zealand and how you can solve them effectively with Skuad’s AOR solution.

How to Hire Contractors in New Zealand

You can hire contractors in New Zealand directly by opening a subsidiary on this land. One important requirement in this aspect is registering the limited liability company with the local trade register. You must appoint at least one director who will be a New Zealand national. 

Apart from this, you will require a legal address in the country to obtain the status of a resident country.

Once all these formalities are cleared, you can start with the hiring process. 

If you’re thinking - “ how to find contractors in New Zealand?” Upload the project requirements clearly and concisely on any job-hunting platform. Shortlist candidates and conduct thorough interviews. Complete the paperwork and begin onboarding them. 

Direct hiring contractors in New Zealand is quite complex, as is evident. Therefore, this technique is best suited for long-term and stable projects.

Hiring contractors through Skuad AOR

An agent of record in New Zealand is a third-party service provider who hires and manages independent contractors on your behalf. This includes ensuring proper classification, engagement, onboarding, and worker payment disbursement. 

Skuad is a comprehensive platform that offers global AOR solutions to streamline independent contractor management. We enable companies to get the best hands on deck by making global remote hiring a seamless experience. Our many features include,

• Digitally onboarding all new hires within minutes. 
• Drafting employment contracts that adhere to the labor guidelines of New Zealand.
• Automated contractor invoicing and payments.
• Built-in IP protection to shield your company under the relevant laws of New Zealand and more.

How to pay contractors in New Zealand

Most companies prefer to pay contractors directly through checks, cash, direct transfers, or digital payment platforms. This approach benefits them by enabling them to have complete authority and transparency in each aspect of the international contractor payment process.

However, the downside to paying an independent contractor directly in New Zealand is dealing with complicated tax requirements. Unless you have a solid team of legal experts who can guide you through the tax deductions or submission of the right forms, it can often get challenging. 

Another way to pay contractors is through Skuad AOR. It is a much simpler and cost-effective method that allows you to disburse the right payment at the right time. Our global payroll features capabilities such as

• Multi-currency payroll (100+ currencies)
• 100% regulatory compliance
• Simplified expense tracking and management
• Benefits and time-off management from one single dashboard.

Hiring Contractors Directly vs Hiring with Skuad AOR

With this table, let’s better understand the difference between these two methods of hiring independent contractors in New Zealand.

Cost of Hiring Contractors in New Zealand

Depending on the project requirements, the industry, or the location, the total cost of hiring a New Zealand contractor can differ significantly. Still, to give you a rough estimate, the average independent contractor salary in New Zealand is NZ$112,000 per year.

Besides these, you must also consider the method you are deploying to hire a contingent contractor in New Zealand. Companies that directly hire international workers usually incur a significantly higher cost than those that partner up with an agent of record in New Zealand.

How to Convert a Contractor into an Employee in New Zealand

Following these steps does not complicate switching a 1099 worker to a W2 employee.

• Decide on your employment options: If you want to hire an independent contractor as an employee, you can either set up a business entity or partner with a global employer of record solution.
• Know your country’s labor laws: If you select the former option, you must have an in-depth understanding of New Zealand's labor laws and tax regulations. For example, employees in this country are entitled to four weeks of annual holiday after 12 months of continuous service.
• Negotiate with your contractor: Discuss every minute detail of the switch with your contractor, such as changes in job roles, work conditions, employee benefits, and salary.
• Issue a compliant contract: Draft a written employment agreement highlighting the details of this newly established employee-employer relationship.
• Onboard and add them to your payroll: After signing the contract, begin the background verification process. Add the new employee to your company’s payroll system if there are no inconsistencies.

Challenges of Hiring Contractors in New Zealand

Below, we have faced three common struggles businesses face when hiring contractors in New Zealand.

1) The ‘Gateway Test’ under the Employment Relations Act

New Zealand plans to introduce ‘The Gateway Test,’ which includes four criteria to determine the status of an independent contractor vs. employee. They are,

• Written agreement: The company and the worker must have a written agreement that the stated worker is an independent contractor.
• Non-exclusive work: The company cannot control or prohibit workers from performing work for other businesses, including competitors.
• Work flexibility: The company cannot control the number of hours/days the contractor works. 
• Right to decline tasks: The company can not terminate an independent contractor who declines to accept additional work or assignments.

This test aims to clarify the grey line between the status of an independent contractor and an employee in New Zealand. 

However, this poses a significant challenge for businesses. While they can now confidently rely on these criteria to avoid potential disputes, this also means reexamining the current contracting agreements and ensuring they confirm these new requirements. 

One way to handle these changing legal regulations is to partner with contractor management software or hire a separate team of legal experts to mitigate the risk of non-compliance and worker misclassification. But, both these options can be quite costly, especially for small businesses.

2) Tax requirements of independent contractors in New Zealand

An independent contractor in New Zealand must pay their taxes (contractor tax New Zealand) directly to the Inland Revenue Department (IRD). 

Contrary to popular belief, it does not relieve the employer of their responsibilities. Tax management for self-employed workers gets even more complex. This is because you now have to ensure that your contractor follows all the guidelines and submits their tax forms on time to avoid legal challenges for your business.

Independent contractors file individual income returns to pay taxes on their net profit. They can also claim back expenses for business activities. Furthermore, they apply for GST if their annual income exceeds $60 GST.

Here are some of the many obligations of a contingent contractor in New Zealand. It might not always be possible to manually ensure all these requirements are met, especially when your business has multiple contractors. This is why most businesses rely on contractor management software to guide and avoid non-compliance.

Hire Contractors in New Zealand with Skuad

Skuad is a global employment platform that allows you to hire independent contractors from more than 160 countries, including New Zealand.

With our comprehensive solution, you can instantly onboard any new hire, run global payroll securely, and manage work permits, timesheets, benefits, and more from a single space.

Additionally, with Skuad Shield, you can always stay up-to-date with the latest changes in New Zealand's employment laws. Our IC compliance experts ensure you follow all the legal worker classification protocols. In this way, you no longer have to worry about non-compliance or deal with expensive legal penalties and fines.

Book a demo with us today and take your hiring journey to the next level only with Skuad.