Tax differences between hiring employees or contractors for small businesses in New Zealand
Employee, or independent contractor? This is a problem that small and micro-enterprises in New Zealand often encounter when they are short of man- and medium-sized enterprises. Unlike China and the United States, which have well-developed human resources and equal employment, employers are not subject to all sorts of strange legal provisions; So, from a tax perspective, what's the difference between an employee and a contractor for a business?
Employee or independent contractor?
Why do business owners have to be clear about the differences between employees or contractors?
Taxpayers' obligations vary according to their employment status, and in New Zealand natural persons serve the enterprise in two categories: employee and independent contractor, or contractor.
What are the different obligations for employees and contractors for the business?
1) Employee employee
Payroll tax PAYE is deducted by the employer and paid to the Inland Revenue Department on a periodic rate
Employees cannot register for GST
Employees cannot claim deductions for employment-related expenses (e.g., gas and parking while driving to work) when they receive their wages.
The company is responsible for the employee's ACC Levy and employee insurance (high-risk work)
2) Independent contractor independent contractor
The business pays the contractor as agreed (cycle, or percentage) and is responsible for processing withholding tax
Typically, an independent contractor collects money from the business in the form of an invoice invoice, indicating the hourly wage plus GST as the invoice receivable amount
Contractors can register for goods and services tax and charge the business a goods and services tax
Contractors may deduct expenses related to their work (e.g. driving to work or other related expenses)
Contractors must pay the relevant ACC Levy and Insurance premiums themselves
Who pays more per hour for independent contractors and employees?
Independent contractors who do not take any annual sick leave and are subject to insurance and ACC Levy themselves will be paid significantly more on an hourly basis than their employees, whether full-time or part-time. Typically, the hourly wages of independent contractors and employees of manual workers are 1.4 to 1.6:1, while the hourly wages of independent contractors of mental workers can even be compared to 2 to 2.5:1.
Small and medium-sized business owners can make a comprehensive judgment, do not be intimidated by high wages, because independent contractors are usually experienced people, and come to give money not to give money, the end of the contract a pat and twice without any legal obligations, if injured in labor will not add too much trouble to the employed enterprises. That's why many jobs in New Zealand prefer to pay more for independent contractors in the short term than for cheaper hourly wages.
Employee or independent contractor?
Why do business owners have to be clear about the differences between employees or contractors?
Taxpayers' obligations vary according to their employment status, and in New Zealand natural persons serve the enterprise in two categories: employee and independent contractor, or contractor.
What are the different obligations for employees and contractors for the business?
1) Employee employee
Payroll tax PAYE is deducted by the employer and paid to the Inland Revenue Department on a periodic rate
Employees cannot register for GST
Employees cannot claim deductions for employment-related expenses (e.g., gas and parking while driving to work) when they receive their wages.
The company is responsible for the employee's ACC Levy and employee insurance (high-risk work)
2) Independent contractor independent contractor
The business pays the contractor as agreed (cycle, or percentage) and is responsible for processing withholding tax
Typically, an independent contractor collects money from the business in the form of an invoice invoice, indicating the hourly wage plus GST as the invoice receivable amount
Contractors can register for goods and services tax and charge the business a goods and services tax
Contractors may deduct expenses related to their work (e.g. driving to work or other related expenses)
Contractors must pay the relevant ACC Levy and Insurance premiums themselves
Who pays more per hour for independent contractors and employees?
Independent contractors who do not take any annual sick leave and are subject to insurance and ACC Levy themselves will be paid significantly more on an hourly basis than their employees, whether full-time or part-time. Typically, the hourly wages of independent contractors and employees of manual workers are 1.4 to 1.6:1, while the hourly wages of independent contractors of mental workers can even be compared to 2 to 2.5:1.
Small and medium-sized business owners can make a comprehensive judgment, do not be intimidated by high wages, because independent contractors are usually experienced people, and come to give money not to give money, the end of the contract a pat and twice without any legal obligations, if injured in labor will not add too much trouble to the employed enterprises. That's why many jobs in New Zealand prefer to pay more for independent contractors in the short term than for cheaper hourly wages.
