Contractor Or Employee NZ: Gateway Test Checklist

Maya runs a growing Auckland design studio. She wants to bring in Leo, a senior designer, for three months to help with client campaigns. Leo has his own business, invoices clients, and wants to keep working with other studios too.

That sounds like a contractor arrangement. But Maya is also thinking about giving Leo set weekly hours, adding him to the team roster, and asking him to get approval before taking on other work.

This is exactly where the contractor or employee question gets tricky in New Zealand. The Employment Relations Amendment Act 2026 adds a contractor gateway test, which gives you a clearer path for some contractor arrangements, but only if you set things up properly from the start.

Can You Treat Someone As A Contractor Under The 2026 Gateway Test?

Yes, you may be able to treat someone as a contractor if the arrangement satisfies the contractor gateway test and the written agreement matches how you actually work together.

The Employment Relations Act 2000 has long allowed workers to ask whether they're really employees, even if their contract calls them contractors. The 2026 changes add a gateway test for contractor arrangements. If your arrangement meets the test, the person is generally stopped from challenging their status as an employee under the usual section 6 test for that engagement.

For a business, that means the first question is no longer just, 'Does this feel like a contractor?' It is, 'Can we honestly meet each limb of the gateway test before the work starts?'

In practical terms, you should check whether:

• There's a written agreement that clearly says the person is an independent contractor, not an employee.
• The person had a reasonable opportunity to get independent advice before entering into or signing the contractor arrangement.
• The person is free to work for others, including competitors, provided they don't do that other work at the same time as performing the agreed work for you and they don't misuse your confidential information.
• You aren't controlling availability like an employer, such as requiring specific days, times or minimum hours, unless the person is allowed to subcontract the work. Any vetting of a subcontractor should be limited to checking statutory requirements or, where justified by the work, relevant qualifications and criminal record.
• The person can say no to extra work without you ending the whole relationship simply because they declined another task or engagement.

If you miss one of these points, it doesn't automatically mean the person is an employee. It does mean you're likely back in the ordinary employee or contractor assessment, where the real nature of the relationship matters.

What Should You Check Before You Engage A Contractor?

You should check the work, the level of control, the worker's independence, and the documents before you send an offer or onboarding email.

The safest time to make this call is before the person starts. Once someone is working inside your systems, using your equipment, taking directions from your managers and filling a regular roster, it becomes much harder to tidy things up with a contract later.

Pre-Engagement Checklist

• Describe the outcome, not the role. A contractor should usually be engaged to deliver a project, service or result, rather than to fill an ongoing staff position.
• Check whether you need set hours. If you need Monday to Friday coverage from 9am to 5pm, that points towards employment unless genuine subcontracting is available within the gateway rules.
• Ask whether they have their own business. Look for their NZBN if they have one, business email, website, insurance, tools, systems or other clients.
• Give time for independent advice. Build in a reasonable opportunity for the contractor to seek their own advice before they sign or accept the arrangement.
• Decide who supplies the tools. Contractors often use their own equipment, although this depends on the industry and the work.
• Work out payment structure. Project fees, milestone payments or hourly contractor rates can work, but the invoice process should be clear.
• Confirm they can work elsewhere. They should be free to perform work for any other person, including competitors, as long as they don't do it at the same time as your agreed work and don't misuse your confidential information.
• Check confidentiality and IP needs. If they will create content, code, designs or processes, your agreement should deal with ownership and licensing.
• Decide who can delegate or subcontract. If you rely on subcontracting because you need specified times, days or minimum periods, keep any vetting to statutory requirements or, where justified, relevant qualifications and criminal record.

You should also be honest about the commercial reality. A cleaner who runs a cleaning business and services 12 clients is a very different risk profile from someone who works only for you, wears your uniform, follows your roster and uses your supplies every week.

A contractor agreement template can help you spot the usual clauses, but it often won't answer the gateway test for your exact setup. The contract and the way you manage the person need to line up.

What Does The Contractor Gateway Test Look Like In Practice?

It depends on the facts, but a contractor arrangement is much stronger when the person keeps real business independence.

Let's return to Maya and Leo. Maya wants Leo to help with 3 campaign launches over 12 weeks. Leo charges $1,200 plus GST for each campaign concept package, invoices at each milestone, uses his own laptop and design software, and works from his own studio.

Maya's draft arrangement says:

• Leo is engaged as an independent contractor.
• Leo had a reasonable opportunity to seek independent advice before signing the agreement.
• Leo can work for other clients, including other design studios, as long as he doesn't do that work at the same time as performing the agreed work for Maya and he protects Maya's confidential client information.
• Leo can choose when he works, provided he meets agreed milestone dates.
• Leo can decline extra campaign work if Maya offers it later.
• If Leo wants to subcontract part of the work, Maya can only vet the subcontractor for confidentiality, statutory requirements and relevant qualifications where those checks are justified by the work.

That arrangement is much more likely to fit the gateway test. Maya cares about the finished campaign concepts, not whether Leo sits at a desk from 9am to 5pm.

Now change the facts. Maya asks Leo to work onsite every Monday, Wednesday and Friday from 8.30am to 5pm, attend daily staff meetings, get approval before working for anyone else, and accept all overflow design jobs. Leo is paid weekly, uses Maya's equipment and appears on the team page as staff.

Even if the contract says 'contractor', those facts are much less comfortable. Maya may not satisfy the gateway test, and Leo may have a stronger argument that the real relationship looks like employment.

The lesson is simple: write the contract around the business model you actually need. If you need control, supervision and regular availability, an employment arrangement may be the cleaner option.

What Should An Independent Contractor Agreement Include?

An independent contractor agreement should clearly document the commercial arrangement and support the gateway test where you're relying on it.

The agreement shouldn't just say 'contractor' at the top. It should explain how the contractor works, what they're delivering, how they're paid, what they own, what you own, and what happens if things change.

Fill-In Outline For Your Agreement

1. Parties. List your business name, NZBN if relevant, and the contractor's legal name or company details.
2. Contractor Status. State that the contractor is engaged as an independent contractor and is responsible for their own business obligations.
3. Independent Advice. Record that the contractor has had a reasonable opportunity to seek independent advice before entering into the arrangement.
4. Services. Describe the specific services, deliverables or project outcomes you're engaging them for.
5. Timing And Milestones. Set deadlines, milestone dates or service levels without turning them into employee-style rostered hours. If you require specified times, days or minimum periods, check whether genuine subcontracting is allowed and whether your vetting fits the gateway rules.
6. Fees And Invoicing. Explain rates, GST treatment if applicable, invoice timing, payment terms and reimbursable expenses.
7. Freedom To Work Elsewhere. Confirm the contractor can work for any other person, including competitors, provided they don't do that other work at the same time as performing the agreed work for you and don't misuse confidential information.
8. Extra Work. State that extra tasks need agreement and that declining extra work won't automatically end the whole contract.
9. Subcontracting Or Delegation. Say whether subcontracting is allowed and keep any vetting to statutory requirements or, where justified by the work, relevant qualifications and criminal record.
10. Intellectual Property. Set out who owns work product, whether rights are assigned or licensed, and when ownership transfers.
11. Confidentiality And Privacy. Protect business information, customer data and personal information handled under the Privacy Act 2020.
12. Insurance And Compliance. Record any required insurance, health and safety duties, industry standards or licence requirements.
13. Termination. Explain how either party can end the contract, including notice, payment for completed work and return of materials.

This outline isn't a finished legal document. A lawyer should tailor it before you use it, especially if the contractor will be creating valuable IP, handling customer data, working with vulnerable clients, or representing your brand.

One clause won't save an arrangement that operates like employment. But a well drafted agreement gives you a much better foundation from day one.

What If The Arrangement Doesn't Fit The Gateway Test?

If the arrangement doesn't fit the gateway test, you should pause and decide whether an employment agreement is more appropriate.

Missing the gateway test doesn't automatically create an employment relationship. The usual employee vs contractor test can still apply, looking at the real nature of the relationship under the Employment Relations Act 2000. That assessment can include control, integration into the business, who takes financial risk, whether the person can profit from good management, who provides tools, and what both sides intended.

From your side, the practical consequences can be significant if someone is later found to be an employee. You may need to deal with:

• minimum employment standards, including minimum wage obligations;
• annual holidays under the Holidays Act 2003, including 4 weeks' annual holidays after 12 months' continuous employment;
• sick leave entitlements, including 10 days' sick leave after 6 months if the eligibility rules are met;
• public holiday, alternative holiday and other Holidays Act payments;
• employment agreement requirements and good faith obligations;
• PAYE, KiwiSaver and other payroll consequences, where you should get tax or payroll advice; and
• possible penalties if the arrangement has been used to avoid employment obligations.

If you need the person to be available on set days, follow detailed directions, use your systems and sit within your team, an employment agreement may give you more certainty. You can still build flexibility into employment where the law allows it, such as casual employment, part-time employment or a fixed-term agreement if there's a genuine reason for the fixed term.

The cleanest option depends on what your business actually needs from the working relationship.

Common Drafting Mistakes To Avoid

The most common mistake is drafting a contractor agreement that says one thing while your day-to-day management says another.

Here are the issues we see trip businesses up when they're trying to use contractors properly.

• Using employee language. Words like salary, leave, manager, probation and roster can point in the wrong direction. Use commercial language that fits the arrangement.
• Requiring approval for other work. A blanket ban, non-compete or general conflict approval process can undermine the gateway test. Focus on preventing misuse of confidential information instead.
• Setting fixed hours by default. Deadlines are usually easier to justify than rostered hours. If you need specified times, days or minimum periods, check whether employment is better or whether subcontracting is genuinely available within the gateway rules.
• Skipping independent advice time. Don't rush signature on the same call or treat the paperwork as a formality. Give the contractor a reasonable chance to get their own advice.
• Forgetting IP ownership. In New Zealand, paying a contractor doesn't automatically mean you own every copyright work they create. Your agreement should deal with assignment or licensing clearly.
• Adding unpaid restraint-style obligations. If you want limits after the engagement ends, keep them narrow and commercially reasonable, and remember they may affect whether the gateway test is available.
• Letting managers treat contractors like staff. Your team needs to know the difference, especially around directions, performance management, work allocation and access to internal benefits.
• Ignoring privacy and data access. If a contractor handles personal information, set Privacy Act 2020 obligations around collection, storage, use, access and return or deletion.

A helpful habit is to keep a short engagement note on file as part of a legal health check before the contractor starts. Record why you're using a contractor, how each gateway point is satisfied, when the contractor had a reasonable opportunity to seek independent advice, and who approved the arrangement. If the relationship changes later, review the contract rather than letting it drift.

Key Takeaways

• The contractor gateway test under the Employment Relations Amendment Act 2026 gives businesses a clearer pathway, but only where the written contract and the real arrangement line up.
• The gateway checklist should include a written contractor agreement, a reasonable opportunity for independent advice, freedom to work for others, control over availability, any subcontracting rights, and the ability to decline extra work.
• A contractor should be free to work for any other person, including competitors, provided they don't do that work at the same time as your agreed work and don't misuse confidential information.
• If you require specified times, days or minimum periods, the gateway test requires subcontracting to be allowed, with vetting limited to the permitted checks.
• If you need employee-style control, set hours and ongoing availability, an employment agreement may be safer and cleaner.
• Review contractor arrangements when the work changes, especially if a short project turns into an ongoing role inside your team.

If you'd like help with your contractor agreement, gateway test checklist, IP and confidentiality clauses, or choosing the right engagement structure, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.