If your business requires additional assistance but you’re uncertain about budget constraints or the workload to justify hiring a permanent employee, you might consider engaging a contractor or unpaid intern/volunteer.
The decision on the type of assistance to engage should be based on several factors, including your specific needs, financial resources, and the level of commitment required.
Difference between employees and contractors
Many small businesses often confuse employees with contractors. However, it’s crucial to recognise their distinctions because they entail different obligations and require distinct treatment.
The primary discrepancy lies in the fact that employees are directly employed by you, whereas contractors are self-employed individuals.
Here’s the essential information about employees and contractors, including their distinctions:
Employee
- Employees work directly for you and can be instructed on what tasks to perform, when to perform them, and how to execute them. This also applies to individuals involved in triangular employment arrangements.
Triangular employment situation — Employment New Zealand
- They have a fixed schedule of hours per week or month and receive overtime pay for any additional hours worked.
- They perform their duties at locations designated by you and utilize equipment provided by your organization.
- Have an employment agreement with you.
- All employees are entitled to basic employment rights under labour laws, such as receiving at least the minimum wage, entitlement to annual holidays, and other types of leave.
- Employees have the right to raise personal grievances.
- Employers are required to maintain records of employment agreements, employee wages, hours worked, and records of holidays and leave.
- Employers are required to deduct and pay PAYE taxes and KiwiSaver contributions on behalf of their employees.
Contractors
- They have the autonomy to determine when and how they complete their work and can enlist others to assist in its completion.
- They are accountable for completing the work to the specified standards within the agreed-upon timeframe.
- Typically, contractors own and manage their own assets and equipment.
- They operate their own business, advertise their services, and have the freedom to work for multiple clients or employers.
- Contractors are generally exempt from most employment-related laws, which means they do not receive entitlements like annual holidays, or sick leave, and cannot file personal grievances.
- Contractors are responsible for paying their own taxes and ACC levies.
Contractors
Engaging a contractor can appear attractive to many businesses due to the absence of long-term commitments. However, it’s important to assess whether contractors are suitable for each specific role and carefully consider their potential impact on your business’s growth.
Typically, hiring a contractor could be beneficial if:
- You need a specialized skill that is not readily available within your organization.
- You anticipate requiring assistance for a limited duration or specific project.
- You are not aiming to establish a permanent team utilizing their skills.
Advantages
- You are not obligated to provide a continuous salary or benefits.
- You are not responsible for handling their taxes and ACC levies.
- You are not required to maintain records of their wages, hours worked, annual holidays, and leave entitlements.
- You can hire them when you need them.
- They are accountable for obtaining their own permits and licenses.
- They typically have experience and require minimal, if any, training.
Considerations
- Contractors may work off-site, necessitating trust that they will meet the required standards and deadlines for completing the job.
- Contractors may have other work commitments, which could mean they are not always available when you need them.
- You may not experience the same level of loyalty from contractors as you would from employees.
- Written agreements with contractors require careful consideration, particularly regarding issues such as copyright ownership and legal liabilities that may need clarification.
Case study: Keeping contractors safe
Judy, as a contractor working on the bank’s website, operates mainly from her home but occasionally uses the bank’s head office. She is uncertain about who is responsible for her health and safety in this arrangement.
According to the bank’s administrator, they are required to take practical measures to ensure a safe working environment for Judy. This includes providing training on emergency procedures and ensuring that potential hazards like loose cables are properly managed.
It’s important to note that the specific requirements for ensuring workplace safety can vary depending on the nature of the work. For instance, if Judy were working on a fishing vessel, the employer would have additional safety responsibilities.
Unpaid interns and volunteers
If you have a task that could provide an inexperienced individual with valuable skills and enhance their job opportunities, you may consider offering an unpaid internship or volunteer position. This opportunity should not be viewed solely as a means to receive free assistance; it is important to ensure that the individual will benefit from the experience, despite not receiving payment.
Unpaid internships and volunteer positions are generally most suitable for businesses that:
- have specific roles that provide individuals with new skills or opportunities they wouldn’t otherwise have.
- provide services that contribute to the community.
Here is a summarisation of the benefits of utilizing unpaid interns or volunteers, along with other considerations:
Advantages
- They frequently bring a strong sense of passion and can introduce innovative ideas to the business.
- They can help to free up your time or the time of other staff members.
- They can serve as valuable sounding boards for new ideas, products, or services.
- They frequently possess a wide range of varied and enriching experiences.
- They are often thankful and appreciative when acquiring new skills.
Disadvantages
- They must be kept safe and provided with the same health and safety training or equipment as any other employee.
- Training them may require more time than you originally anticipated.
- A volunteer can leave at any time.
- You cannot pay them, but you can offer a koha or gratuity. Ensure they understand that this is not a form of payment.
- Unpaid internship positions typically last between 6 weeks and 12 months.
Here are the best practices for engaging unpaid interns/volunteers:
- Clearly outline in writing the terms of the unpaid internship/volunteer role to avoid any misunderstandings about payment or rewards.
- Explicitly state that the position does not guarantee future employment.
- Avoid assigning tasks integral to the business that would typically be performed by employees.
- Set limits on the duration and hours of unpaid internship/volunteer work to minimize the risk of being classified as an employee.
- Maintain records of the internship/volunteer duration.
- Provide a reference if appropriate at the end of the position.
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