Contractor FAQs

A contractor operates independently, usually earning income by invoicing for their services and is responsible for organising their own finances.

On the other hand, a permanent employee receives a salary or wage, with their employer managing PAYE (Pay As You Earn) tax and ACC (Accident Compensation Corporation) levies on their behalf.

Generally, if you’re seeking stability, mentorship, and minimal paperwork, permanent employment might suit you best. Conversely, if flexibility, diversity of projects, and the potential for higher earnings appeal to you, contracting could be for you.

If you’re thinking about becoming a contractor, there are a few initial things to consider to avoid any unwelcome surprises down the line. 

Despite all the awesome opportunities of contract work, it does come with a few financial obligations/decisions that would normally be taken care of by a permanent employer; which are important to know about and sort through.

1. Will I need to register for GST?
2. Should I register as a Company or Sole Trader?
3. How do I manage my cash flow?
4. How should I handle my tax obligations?

Before you make a decision, get to know the pros and cons of both options. Here is a helpful article to help figure out what’s right for you. Both structures have different legal and financial obligations which are important to know about. 

If you still aren’t sure and need specific advice on your situation we recommend getting in touch with an accountant.

Withholding Tax (WHT) is a type of income tax deduction. It is deducted from your Contractor Income (referred to as schedular payments by the IRD) and paid directly to the IRD by a recruitment/labour hire company like us – Consult Recruitment. Since April 2017, by law, all labour-hire organisations such as Consult are required to withhold a portion of your earnings as Withholding Tax, paying it directly to the IRD.

You will need to complete an IR330C form before you receive any schedular payments, specifying how much WHT you would like us to deduct. We will ensure you have all the right documentation to fill out before you start contracting with Consult.

If you have been granted a certificate of exemption (COE) from the IRD you will still need to fill in the IR330C form. The certificate would just permit you to select 0%, and in this case, you will be required to pay your own tax rather than having it deducted from your schedular payments. It is your responsibility to renew your COE and ensure this certificate is current. 

If your current certificate expires and you do not wish to renew your COE, let us know and you can fill out a new IR330C form stating how much WHT you would like us to deduct. If we haven’t heard from you before your next pay then (as a last resort) Consult is legally required to deduct the “non-notification percentage” which is 45%. 

Glossary:

Withholding Tax (WHT): A type of income tax deduction taken from certain types of taxable income/activities. Specified as a percentage of earnings.

IRD (Inland Revenue Department): The New Zealand government agency responsible for tax collection.

Schedular Payments: Payments made to contractors by recruitment or labour-hire companies, subject to WHT.

IR330C Form: A form contractors complete to specify their preferred rate of WHT deduction.

Certificate of Exemption (COE): A certificate that allows contractors to choose a 0% WHT rate, requiring them to manage their own tax payments directly.

In a nutshell, our standard payment cycle is on the 25th of the month following work completed i.e. if you start work on the 15th of March, your first payment would be the 25th of April for all your days/hours worked in March. If the 25th falls on a weekend or public holiday, you will get paid the business day prior.

Your team at Consult will be able to tell you exactly when you can expect to receive your first payment based on your start date.

In short, yes you will need insurance and to make things easier for you, we have partnered with Clarity Insurance Brokers to bring you a specialised insurance package designed for independent contractors (at no cost to you!*). Click here for more information and the cost benefits of opting into our insurance programme.

For Independent Contractors, insurance is used to protect both the contractor and the business they are contracting to from potential loss arising from the work that has been completed – including unintentional errors.

The industry and role you specialise in will determine what insurance you need. Without it, you could run the risk of losing money and, in some cases, the opportunity to work on some projects.

The insurance provided to each contractor is made up of three separate liability policy lines:

Professional Indemnity Insurance: Cover to protect against the failure to exercise reasonable skill and care in the provision of professional or advisory services. Predominantly claims are made against an individual or company when an error has caused a financial loss.

Public Liability Insurance: Cover for accident or injury to third-party persons or property. It may include covering repair or replacement costs for damage that you’ve caused to a third party’s property and your legal expenses in the event a public liability claim is lodged against your business. 

Statutory Liability Insurance: Responds to unexpected and unintentional breaches of statute (New Zealand laws) resulting in prosecution.

For more information on this, please get in touch with one of the team to discuss – or email info@consultrecruitment.co.nz

*For up to $2million limit of coverage

At Consult, we appreciate that paying for insurance as an Independent Contractor can be a bit of a ‘grudge spend’, which is why we’re happy to arrange and pay the premiums for contractor insurance. This includes the first $2 million in professional indemnity and public liability coverage, plus up to $500,000 for statutory liability insurance, for individuals who opt in and meet the eligibility criteria.

Professional Indemnity insurance is one of the most expensive forms of liability insurance. At a minimum, securing suitable coverage individually through another insurer can cost well over $1,000. To put the value of this particular benefit into perspective, securing similar individual coverage through a leading insurer would approximately cost $2,500 for a package that covers PI, PL, and SL up to a $2 million limit, or approximately $4,000 for a $5 million limit. This programme is our way of supporting you, ensuring you’re protected without the hefty price tag.

To learn more about this benefit we offer, please get in touch with one of our team to discuss – or email info@consultrecruitment.co.nz

You will need to submit timesheets as you work but we take away the hassle of invoicing and we raise a BCTI (Buyer Created Tax Invoice) on your behalf. So, all we need are your timesheets, and we’ll handle everything else for you.

We use a timesheet system called Astute. It’s very user-friendly and we’re with you along the way to answer any questions or help out with any issues you may have – which we assure you should be minimal.

Understanding your obligations, including, but not limited to; income tax, ACC levies, KiwiSaver contributions, and student loan repayments, is crucial when you’re contracting. While it can all seem complex, remember that you have options based on the spectrum of your previous experience, needs, and comfort levels.

As a recruitment agency, our expertise does not cover providing tax advice. However, we can guide you towards third-party services known for their quality assistance in these areas should you want it. While we encourage exploring these options, the decision on how to manage your tax and legal obligations remains yours. 

Our Contractor Care team is here to support you by pointing you in the direction of professional services that align with your needs, ensuring you’re well-informed to make the best decision for your contracting journey.

Essentially as an independent contractor, you only get paid for the hours you actually work, therefore, you are not entitled to be paid on public holidays or for sick leave. This means that in times when you’re not working, you’ll need to have some money put away to cover your household and personal expenses.

A common baseline recommendation is that you put away enough funds to cover at least 2 months’ worth of your household expenditure. Again, everyone has unique circumstances, so, we advise you to tailor the above to your personal situation.

ACC is a government organisation that functions like a public health insurance provider. It covers everyone in New Zealand – including visitors and those not currently employed – and will help pay for medical costs, support at home and work, and any loss of income, due to injury. So, a pretty important cover to have – ‘touch wood’.

Everyone who works or owns a business in New Zealand is subject to paying ACC levies. If you’re a permanent employee, this is automatically deducted from your paycheck, however, as a contractor receiving schedular payments, you are personally responsible for calculating and paying these levies each year (around September), in addition to the income tax you pay. 

Here’s a useful link with more information, particularly around how these levies are calculated.

We’ll keep in touch with you throughout your contract, however, if at any time you have any specific issues or questions please reach out. It’s common for our contractors to extend their contracts and we tend to work on getting you a contract extension about 4-6 weeks before your end date. 

As things tend to move quickly, generally, it’s recommended (if you aren’t extending your contract) to chat with your consultant towards the end of your contract, particularly around us helping you find your next role. We place a lot of people multiple times and love nothing more than great people being placed in great roles. 

To determine the direction of your next contract, we’ll talk about what worked and what didn’t in your current role, dive into what you’re aiming for next, and explore any particular companies on your wish list. The more you tell us, the better we can match you with a role that really fits.

Let’s face it, the world of recruitment is crowded, which can make it a challenge to find the right fit for you. 

What sets Consult apart is our genuine care for our people. We’re not just filling positions; we’re on a mission to make a difference, changing lives by connecting talented individuals with outstanding organisations. Our drive comes from aligning you with roles that match your career aspirations and leveraging our expertise in niche areas to build exceptional teams.

We understand that your contracting path might not always intertwine with Consult. That’s why we’re committed to fostering a broader community, ensuring that once you’ve worked with us, you’re forever part of the Consult family. Our goal is to create a network where everyone feels included, part of a team, and less isolated. We’re in this together for the long term, and we aim for our partnership to reflect that commitment.

…Plus, we’ve got a few extra perks for our community: