Contractor FAQs.
Commonly asked questions about contracting in New Zealand along with helpful links to make sure you’ve got the right info to kickstart your contracting journey (because let’s be honest, there’s a lot out there!).
Just a heads-up: while we’re experts in recruitment, we’re not tax advisors, insurance specialists or accountants. For specific advice, we strongly recommend chatting with a professional. If you have any questions, feel free to reach out to us at info@consult.co.nz
Contracting in NZ FAQs
What’s the difference between being a contractor vs permanent employee?
A contractor operates independently (as self-employed) and is typically hired for specific projects or fixed terms, often earning higher hourly or daily rates and is responsible for managing their own taxes, insurance and finances.
A permanent employee receives a regular salary or wage, with their employer handling PAYE (Pay As You Earn) tax and ACC (Accident Compensation Corporation) levies on their behalf.
Permanent employee
Independent contractor
Receive a regular salary or wage.
Typically earn a higher hourly or daily rate compared to permanent employees on a fixed-term contract lasting 3 to 12 months.
Have income tax, ACC levies, and student loan deductions handled by their employer.
Are classified as self-employed, which means they are responsible for their own income tax, ACC levies, and GST filings.
Are entitled to annual leave, sick days and public holiday leaves.
Are not entitled to annual leave, sick days and public holiday leaves.
Work hours and location are set by the employer in an employee contract.
Has flexibility to choose their work schedule, with opportunities for broad professional development across various projects, sectors and businesses.
Benefit from automatic KiwiSaver contributions matched by their employer.
Manage their own KiwiSaver contributions and arrange their own insurance.
Hired to perform specific tasks in an ongoing or open-ended capacity.
Might need to budget for potential income gaps between contracts.
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.
What do I need to consider before I start contracting?
If you’re thinking about becoming a contractor, it’s important to know about your financial and legal obligations and your options. Not to worry – we’ve got all the information you need to know linked below:
- Should I be a Sole Trader or register as a Company?
- Do I need to register for GST?
- How do I handle my tax obligations as a contractor?
- What is ACC (Accident Compensation Corporation)?
- Do I need insurance as a contractor? And what for?
- How do I manage my cash flow as a contractor?
We know starting out as a contractor for the first time can be super overwhelming! When you contract with Consult, you’ll have a dedicated consultant to answer any questions throughout your assignment.
Should I be a Sole Trader or register as a Company?
Both structures have different legal and financial obligations which are important to know about. Here is a helpful article to help figure out whether operating as a sole trader or registering as a company is right for you.
If you’re still unsure, feel free to reach out to your dedicated consultant or info@consult.co.nz. If you need specific advice on your situation, we recommend getting in touch with an accountant (which we can help refer you to as well).
Do I need to register for GST?
Whether you’re a sole trader or a company, if you think you’ll earn more than $60,000 in 12 months, you must register for GST. You may be charged penalties if you don’t register when you need to.
If you don’t think you’ll turn over that much, it’s up to you whether or not to register for GST.
Once you are GST registered, you will need to file regular GST returns which your accountant can help you with.
You can register for GST through MyIR, it only takes a couple of minutes. For more information on GST, please click here.
What is Withholding Tax and how do I deal with income tax?
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 Recruitment 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 us.
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 Recruitment 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.
How do I handle my tax and legal obligations as a contractor? What support can I access if I need it?
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.
DIY
If you’re well-researched and confident, taking care of these obligations yourself is entirely possible.
An accountant
Seeking an accountant’s support can provide personalised assistance and clarity when you need it (however for a fee).
Third-party services
Numerous companies specialise in assisting contractors with their specific requirements. These services streamline the process, ensuring your obligations are met accurately and efficiently (again, for a fee).
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 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.
What is ACC (Accident Compensation Corporation)?
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 pay check by your employer, 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 ACC levies are calculated for contractors.
Do I need insurance as a contractor? And what for?
In short, yes, you will need insurance as an independent contractor.
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 insurance, you could run the risk of losing money and, in some cases, the opportunity to work on some projects.
The insurance required for 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 the types of insurance, please get in touch with your dedicated consultant to discuss which options make sense for you.
Will I be paid for public holidays and sick leave?
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 according to your personal situation.
Can’t find what you’re looking for?
We’re here to answer your questions.
Contracting with Consult FAQs
Why contract through Consult Recruitment?
We’re well known in New Zealand not just for recruitment, but for the care we put into our contractor community. We know what great contracting looks like, and we’re with you the whole way. Not just day one.
Our goal is to create a community where everyone feels included, part of a team, and less isolated. Our consultants are here to help navigate the ups and downs of your career. We’re focused on your long-term success and we value our relationship with you, whether you’re currently on assignment or not.
We also understand your contracting journey might not always be through Consult, and that’s okay. That’s why we’re committed to building a broader contractor community. Once you’ve worked with us, consider yourself part of the Consult family for good.
Plus, we’ve got extra perks for our contractors!
When will I get paid?
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 dedicated consultant will be able to tell you exactly when you can expect to receive your first payment based on your start date.
Will I need to submit timesheets and generate an invoice?
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.
How do I find work when my contract ends?
The team at Consult is super good at keeping in touch with you throughout your contract assignment, 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, 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, what you’re looking for in your next role, and explore any particular companies on your wish list. Also, if you’ve spotted a role that interests you, let us know that too. The more you tell us, the better we can match you with a role that really fits.
Contract with us and enjoy the perks!
We know what great contracting looks like and we make it easy! By contracting with Consult, you get all the support from our team and be joining a great contractor community!
Explore our specialist recruitment areas:
At Consult, we are specialist recruiters in Tech, IT & Digital, Accounting & Finance, Professional Services & leadership roles. But thanks to our strong networks, even if you’re outside these areas we can help point you in the right direction.
Here’s a little taste of the roles we help contractors land:
Tech, IT & Digital
Development, Testing, Product, AI, Data, Architecture, DevOps, Cloud, Infrastructure & Security.
Accounting & Finance
Transactional Accounting, Payroll, Finance Systems, Risk, Compliance.
Professional Services
Business Advisory Services (BAS), Tax, Audit & Assurance, Consulting & Advisory.
Enterprise & Transformation
Change, Strategy, PMO, Transformation Leads.
