If an employer engages workers as independent contractors rather than employees, the employer is then able to avoid keeping employment records, making payments to IRD and  to pay wages less than minimum wage. However, the Employment Relations Authority has been hitting employers who incorrectly categorise workers as contractors.

In a recent case a company has been fined $2000 by the Employment Relations Authority (ERA) and ordered to pay the two employees the amount that they were underpaid while working.

The ERA determined that the two men involved were in fact employee’s of the company after seeing evidence that the men did not use their own tools, they wore uniforms and they did not do any other work outside the company.

The men were paid under minimum wage and they did not receive holiday pay. The IRD will probably now prosecute for failing to pay PAYE and there could be penalties for non payment and penalty interest as well. This could turn out to be a very expensive exercise for the unwary employer.


Alan Knowsley

Employment Lawyer