If you are considering contract work in healthcare, one of the first things to understand is the difference between being an independent contractor and an employee. The distinction affects your tax, your rights, and how you work day to day. Here is what you need to know.
The Key Differences
| Employee | Independent Contractor | |
|---|---|---|
| Tax | PAYE deducted automatically | Schedular payments with IR330C withholding |
| ACC | Employer pays ACC levies | You pay your own ACC levies |
| KiwiSaver | Employer contributes 3%+ | No KiwiSaver contributions |
| Leave | Entitled to annual leave, sick leave | No paid leave entitlements |
| Hours | Set by employer | You choose which shifts to work |
| Control | Employer directs how work is done | You control how you deliver the service |
| Multiple clients | Usually exclusive to one employer | Free to work for multiple clients |
| Equipment | Usually provided by employer | May need to provide your own |
| Earnings | Fixed salary or hourly rate after deductions | Higher gross rate, manage your own deductions |
Why Healthcare Workers Choose Contracting
Many healthcare workers in New Zealand are choosing to work as independent contractors because:
- Higher earning potential — Contractor rates are typically higher to account for the lack of benefits
- Flexibility — Choose when, where, and how much you work
- Variety — Work across multiple facilities and gain diverse experience
- Control — No obligation to accept shifts that do not suit you
- Work-life balance — Build your schedule around your life, not the other way around
The Legal Tests: How NZ Law Determines Your Status
New Zealand courts have developed four tests to determine whether someone is genuinely a contractor or actually an employee in disguise:
1. The Intention Test
What did both parties intend? Is there a written agreement specifying the arrangement? While intention matters, it is not decisive on its own — the reality of the arrangement must match.
2. The Control Test
How much control does the business have over the worker? The more control over duties, hours, methods, and location, the more likely the relationship is employment. Contractors typically have autonomy in how they deliver their services.
3. The Integration Test
Is the worker integrated into the business, or are they providing services as an independent business? An employee is usually part of the organisation's structure. A contractor operates their own business and provides services to clients.
4. The Economic Reality Test
Is the worker genuinely operating their own business? This looks at factors like whether the worker bears financial risk, provides their own tools, can profit from efficiency, and has the opportunity to work for others.
The Proposed Gateway Test
The New Zealand government has proposed a new gateway test to make the contractor vs employee distinction clearer. If your arrangement meets all four criteria, you are considered a contractor:
- Written agreement — There is a written contract specifying you as an independent contractor
- No exclusivity restrictions — You are not prevented from working for other businesses, including competitors
- No minimum hours — You are not required to be available at specific times or for a minimum number of hours (or you can subcontract the work)
- No termination for declining work — The business cannot terminate your contract if you decline an additional task or engagement
If any one of these criteria is not met, the existing four-part test applies.
How TalentGrid Supports Genuine Contracting
When you work through TalentGrid, your arrangement is structured as genuine independent contracting:
- Written agreement — You sign a Contractor Agreement that clearly defines the relationship
- No exclusivity — You are free to work for other platforms, agencies, and facilities
- No minimum hours — You choose which shifts to claim and can decline any shift without consequence
- No penalties for declining — Your account is never affected by choosing not to claim a shift
This structure ensures you have the flexibility and independence that comes with contracting, while still having access to consistent shift opportunities.
What This Means for Your Tax and Obligations
Because you are a genuine independent contractor:
- You are responsible for your own income tax (through schedular payments and IR330C withholding)
- You pay your own ACC levies (invoiced annually)
- You manage your own student loan repayments (if applicable, through your tax return)
- You are not entitled to KiwiSaver employer contributions
- You do not receive paid leave (annual leave, sick leave, public holidays)
- You can claim business expenses on your tax return
The higher gross rates available to contractors are designed to compensate for the absence of these employee benefits.
Is Contracting Right for You?
Contracting works well if you:
- Value flexibility and autonomy
- Are comfortable managing your own tax and finances
- Want to earn more per hour than a permanent role
- Enjoy working across different facilities
- Want control over your work-life balance
Contracting may not be ideal if you:
- Prefer the security of guaranteed hours
- Want employer-provided benefits (KiwiSaver, paid leave)
- Find tax administration stressful
- Prefer working at one consistent location
Getting Started
If contracting sounds right for you, here are your next steps:
- Understand your tax obligations — Read our guide on tax obligations for healthcare contractors
- Get your IR330C ready — Choose your withholding rate before you start
- Set up a tax savings account — Put aside money for tax and ACC
- Join TalentGrid — Create your profile, get verified, and start claiming shifts
This article is for general information only and does not constitute legal or tax advice. If you are unsure about your employment status, consult an employment lawyer or tax advisor.