Understanding Employment Types in New Zealand: Updated Guidance for Employers and Employees

In June 2025, the New Zealand Government introduced a Bill which redefined what an ‘employee’ is, amongst other things. However, as it may be some time yet before that Bill becomes law, this article will focus on the current legal test for establishing that a worker is an ‘employee,’ as opposed to other types of workers.

Determining the Type of Worker

Most workers in New Zealand are either employed, self-employed (such as sole traders), or contractors. Some types of workers, such as members of the Armed Forces, are expressly excluded from many of the protections employees have. Employment status imports a range of rights and protections that a contractor does not have, including leave and minimum wage entitlements.

Whether a worker is an ‘employee’ is determined by considering several tests provided by the courts. It is a two-stage inquiry into the nature of the relationship. The first stage requires identifying the real nature of the relationship between the alleged employer and the work. The second stage then assesses whether that relationship amounts to employment by using several tests or factors. While express terms, like stating that the contractor is not an employee, are a factor, it is not determinative.

The ERA and the Employment Courts apply a series of common law tests or factors to determine whether a worker is an employee or not:

1. Stage one: The starting point is identifying what the parties’ common intention was and how their relationship operates in practice. First, what did the parties intend in entering the agreement? This test assesses the written and oral contractual terms of the agreement to ascertain the common intention of the parties. Then, how the relationship operated in practice is also assessed by considering any divergence from the agreement, or supplemented terms and conditions of the agreement.
2. Stage two: Is the real nature of the relationship one of employment or not? A number of factors are considered to determine what the true nature of the relationship is.
   1. The control test: This examines the degree of control that is exerted over the work and the manner in which the work is done. A high level of control suggests an employment relationship, while greater independence indicates a contractor relationship.
   2. The Integration test: This assesses how integrated the worker’s role is in the business’s operations. If the work is fundamental to the business, the worker is more likely to be an employee. This also considers whether the worker was essentially a part of the business. Conversely, if the work is supplementary to the business, the worker is less likely to be an employee.
   3. The fundamental/economic reality test: this asks whether the worker is carrying on business on his or her own account, or are they working for the alleged employer? This considers factors such as how the worker is paid and who is responsible for tax and other deductions.

These factors help to differentiate between an employee (who is engaged in a “contract of service”) and an independent contractor (who has a “contract for service” and is self-employed).

Employment Types

Whether you are an employer structuring your company or an employee seeking clarity on your rights, is it important to understand the different type of employment in New Zealand.

Permanent or Fixed-Term Employment

Permanent employment signifies an ongoing relationship with no set end date. These employees can be full-time or part-time and are entitled to the full scope of employment rights and responsibilities, including statutory leave entitlements (annual leave, sick leave, bereavement leave, parental leave, family violence leave). The relationship continues until either party lawfully terminates it.

Fixed-term employment is for a specified period or at the conclusion of a defined project. Section 66 of the Employment Relations Act 2000 outlines the requirements for such an agreement. Crucially, there must be a genuine reason for the fixed term, such as covering parental leave or working on a seasonal project. Employers cannot use fixed-term agreements to “trial” an employee or avoid employment law obligations, and the reason for the fixed term must be clearly stated in the employment agreement. Fixed-term employees are entitled to the same entitlements as permanent employees during the course of employment, with holiday pay often paid out on a “pay-as-you-go” basis for contracts under 12 months or accrued otherwise.

Casual Employment

Casual employment is not defined or differentiated in employment law from other employment. It is, in a sense, fixed-term employment. Casual employment is characterised by irregular and intermittent work with no guaranteed hours. The employer is not obliged to offer work, and the employee is not obliged to accept it. Each time a casual employee accepts work, it’s considered a new period of employment. Casual employees are entitled to leave under certain conditions, as outlined in the Holidays Act 2003. Over time, a casual arrangement may evolve into a permanent employment relationship if a regular work pattern develops.

Casual employment is often defined by the following characteristics:

• The engagement is for short periods or specific tasks;
• There is an irregular work pattern and no expectation of ongoing employment;
• Employment depends on the availability of work;
• There is no guarantee of work from one week to the next; and
• There is no obligation on the employer to offer employment nor for the employee to accept it.

In some instances where a regular shift pattern arises, the casual employment can change into one of permanent employment. The lack of an obligation to be available for work, in situations where no work is guaranteed, distinguishes casual employment from the ‘zero hour’ contract arrangements that are now strictly regulated (and normally prohibited) in New Zealand.

Difference between full-time and part-time

While there is no strict legal definition, full-time generally refers to 30 or more hours per week, with part-time being anything less than that. The key takeaway is that being full-time or part-time does not affect employment rights or responsibilities. Permanent part-time employees have the same minimum entitlements as permanent full-time employees; these are usually adjusted on a pro-rata basis.

Why Correct Classification Matters

From a contractor’s or an employer’s perspective, ensuring that when engaging a worker, the relationship is clearly defined is important.

Employment obligations are extensive. If a worker, who was intended to be a contractor, establishes that truth they were an employee, the employer will be liable in employment law for minimum entitlements (like holiday pay), and will be bound by employment law (for example dissatisfaction with the former ‘contractor’s’ performance will not entitle a simple termination of the agreement on notice, but performance management well before termination);

If you are considering hiring someone to perform work for you, the team at Frontline Law can assist in ensuring that the contract is fit for purpose and help you avoid costly disputes. If you think you are an employee in all but name, we can advise you on the merits of your case and advocate for your rights with your employer.

The first step in getting support is to talk with a lawyer from Frontline Law about your situation and see what options we can offer you. Contact Frontline Law for a free initial consultation.

*The information in this blog post is general in nature and is not legal advice. If you need advice, you should contact us about your specific situation.