Independent
Contractor
Agreement NZ

The Gateway Test is a new 5-point legal framework introduced by amendments to the Employment Relations Act 2000. It provides a structured test to determine whether a worker is genuinely an independent contractor or should be classified as an employee. The five criteria are: a written contract stating contractor status, freedom to work for other clients, no requirement for fixed hours, a right of substitution and providing services in the course of their own business.

If a worker satisfies all five criteria they are presumed to be a contractor. If they do not, the ERA will apply the existing holistic test — looking at the real nature of the relationship — and may determine they are an employee despite how the engagement has been described. The Gateway Test does not replace the existing test but provides a clearer first filter.

For businesses this means reviewing all existing contractor arrangements to ensure they reflect genuine independence in both documentation and practice. An agreement drafted before the Gateway Test was announced may not satisfy the criteria even if the underlying relationship is genuinely one of contracting. The time to update your agreements is now — before a dispute arises and the ERA assesses whether your documentation stands up.

By default in New Zealand, a contractor retains ownership of intellectual property they create — unless a written agreement explicitly assigns it to the commissioning business. This is the opposite of employment, where work created in the course of employment is generally owned by the employer.

This means that without a proper IP assignment clause, the code your developer writes, the designs your freelance graphic designer creates, the content your copywriter produces and the systems your consultant builds may all legally belong to them — not to your business. They can use that work, licence it to others or even provide it to a competitor.

An IP assignment clause in your contractor agreement explicitly transfers all work product to your business at the time of creation. It should cover all current and future IP arising from the engagement, including moral rights waivers and obligations to assist with formal registration of IP where applicable. This clause alone is often worth more than the cost of the agreement.

Sham contracting occurs when a worker who is legally an employee is classified and treated as a contractor — deliberately or not. If the Employment Relations Authority determines that your contractor is actually an employee, the consequences can be significant and backdated to when the engagement began.

You can be held liable for: unpaid PAYE tax (which you should have deducted and paid to IRD), KiwiSaver employer contributions, annual leave and public holiday entitlements, the minimum wage for any period it was not met and civil penalties under the Employment Relations Act. In cases of deliberate misclassification the penalties can include significant fines and reputational damage.

The ERA looks at the real nature of the working relationship — not just what the contract says. If you direct the worker's hours, require them to work exclusively for you, provide their tools and equipment and integrate them into your business as you would an employee, a contractor label in a poorly drafted agreement will not protect you. The document needs to reflect a genuinely independent arrangement — which is what our agreements are built to do.

Unlike employment, independent contractors are not entitled to the protections of the Employment Relations Act when an engagement ends. You do not need to follow a formal disciplinary process and there is no unjustified dismissal risk — but only if the agreement is properly drafted as a contract for services and the termination provisions are clear.

A good termination clause covers: the notice period required to end the engagement (for both parties), whether the engagement can be ended immediately for cause (such as breach of the agreement, failure to meet quality standards or insolvency), what happens to work in progress and outstanding invoices at termination and whether any post-engagement obligations — such as confidentiality or non-compete restrictions — survive termination.

An agreement that mirrors employment-style termination obligations — requiring performance management, warnings and a structured process — can be used as evidence that the relationship was actually one of employment. Termination provisions need to reflect contractor independence, not import employment protections into a commercial contract.