When you’re engaging in contracting or self-employment, you aren’t protected by employment law, which includes the minimum standards set by the government. It’s important to thoroughly review your contracts before signing. If possible, seek assistance from a lawyer to ensure you understand the key considerations in contracts.
Your agreement should outline not only the tasks for which you’ll receive payment but also the method of payment.
If you encounter a dispute with a client you work for, you won’t be able to file a personal grievance. Ensure that you establish a mutually agreed-upon process for resolving disagreements as part of your agreement.
Tip
Don’t ever feel pressured to hastily sign a contract – take your time to thoroughly read and consider it.
If you lack confidence in signing a contract, for example, due to a lack of understanding regarding the terms, seek legal advice.
What to check
General terms
- Description of your responsibilities, including tasks and deliverables. This section may refer to “services” as the term used, such as “Services to be provided.”
- Where you will render your services, whether it’s at your home or another designated place.
- Payment details, such as hourly or daily rates, and the invoicing schedule for your fees. This could be weekly, monthly, or upon completion of specific projects or tasks.
- Any expenses or allowances that will be covered, such as reimbursement for using your own vehicle or tools, or provision for food and accommodation during travel.
- Hours of work per day/week/month, which may be defined as a range (e.g., up to 25 hours per week), and the designated work schedule (e.g., weekdays between 9 am and 5 pm).
- The duration or term of the contract, and whether it can be renewed.
- Designation of the client contact person.
- Termination rights for either party.
- Dispute resolution mechanisms. As a contractor, you are unable to file a personal grievance in case of disagreements with your client.
- Ownership of any intellectual property developed as part of the contract.
Insurance or licences
- Requirement for any necessary insurance coverage, such as professional indemnity insurance.
- Licenses that may be required to carry out the work, such as a full driver’s license or a forklift truck license.
Restrictions
- Restrictions on contacting or working with the clients and employees of the business after the contract ends. Many contracts impose a specified period during which you are prohibited from doing so.
- Permission to subcontract the services you are providing, for example, by employing another person to assist you. Clients may approve of this.
- Whether you are allowed to disclose information about the business’s products and services to individuals outside of their organisation. Typically, confidentiality clauses prohibit such disclosures.
Renewals and changes
If your client requests you to continue working beyond the contract’s end date, ensure you obtain written confirmation. The same applies if your client assigns you tasks that differ from the original agreement in your contract.
Request a new contract or a modification to your existing contract, such as an additional page or schedule specifically outlining the changes.
Cancelled contracts
Cancellation of a contract is typically governed by the agreed-upon terms. This rule applies to both parties involved, whether you or the individual/organisation that has engaged your services. A contract is legally binding, making it challenging for either party to cancel it unless the reasons are clearly outlined in the contract terms.
If you intend to dispute the termination of your contract prior to the agreed-upon date, it is advisable to seek legal advice beforehand.
Fact
If you are bound by a fixed-term agreement, you are considered an employee rather than a contractor.
As an employee, you should be entitled to the same benefits mandated by law for permanent employees, such as a minimum number of days for paid holidays and sick leave.
Fixed-term employment agreements
You can only be engaged as a contractor if you genuinely qualify as an independent contractor and not as a fixed-term employee. Some organisations may present you with a fixed-term employment position instead of a contracting role for short-term projects or to cover extended leave, such as parental leave.
When someone offers you a fixed-term role, they should:
- Clearly explain the reasons why the role is limited to a fixed term, providing genuine and credible justifications.
- Clearly state the specific end date of the term, whether it’s after six months, upon completion of the project, or at the end of a particular season, accompanied by a detailed explanation for the chosen end date.
Hiring fixed-term and casual employees
If you are employed on a fixed-term basis, you will have the same entitlement to benefits as permanent employees as required by law, such as a minimum number of days for paid holidays and sick leave. However, due to receiving these benefits, your pay rate may be lower compared to working as a contractor and invoicing your client.
Moreover, as a fixed-term employee, your taxes and ACC levies will be deducted from your pay, along with any other legally mandated deductions, such as child support or student loans.
Check if it’s worth it
Before you make a decision about accepting a fixed-term position, consider the following factors:
Asking for more money
Your employer might propose a fixed-term salary that is equivalent to that of a permanent employee, which is generally lower than the rate offered to contractors. Don’t hesitate to negotiate for a higher rate. Even though you will receive benefits such as paid holiday and sick leave, you still face uncertainty in finding new work once the fixed-term role concludes. Request appropriate compensation to account for this uncertainty.
The amount of leave you are entitled to will be proportionate to the duration of your contract. If you are unlikely to utilise paid leave, for instance, if your tenure with an organisation is only two or three months, you might prefer to be engaged as a contractor and earn a higher hourly/weekly/monthly rate.
End date
If your contract is set to end during a period when securing new contracts is challenging, such as Christmas, it’s worth considering requesting an extension of your contract by a few months from your employer, if possible.
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