Rebuild workers hired as 'contractors' miss out
Hundreds of rebuild workers might be missing out on ACC cover, holiday pay, sick leave and KiwiSaver because they are hired as contractors when they should be employees.
Local recruitment agencies have alerted the Ministry of Business, Innovation and Employment (MBIE), which is investigating companies trying to get around employment rules.
This also means the Inland Revenue Department and the Accident Compensation Corporation may be missing out on thousands of dollars in payments.
In a normal employment situation, firms pay ACC premiums and tax for their staff. But, when workers are self-employed as contractors, they have to take care of those payments, and many fail to do so, recruitment companies say.
Kevin Eder, the owner and managing director of one, Tradestaff, says many young people and migrant workers sign on as contractors, unaware of employment rules.
"If you are instructed what time to turn up, what work to do, when to go home and the vast majority of your work is coming from one employer, then you are by definition an employee," Eder said.
"For a lot of new small-to- medium enterprises formed to do rebuild work, it's an absolute pain to meet all the requirements to have employees. So what they tend to do is pass the responsibility on to the worker."
Eder said that, in some cases, employers lured workers to sign on as contractors with higher rates.
"At first glance, it looks like you're earning a lot more money. But as a contractor you are not entitled to annual leave, statutory holidays, sick leave, KiwiSaver, and you won't be covered by ACC on a worker basis.
"Employees think they are getting a great deal but the issue comes when the employee gets injured and they try to claim ACC, and find out they are not covered, or when they finish their contract and find they have no holiday pay."
Eder estimated that 90 per cent of people who were employed as contractors should be designated as employees.
That meant that ACC and Inland Revenue were missing out on "a hell of a lot of money".
An ACC spokesman said the corporation was aware of workers "who've had misunderstandings about their earner status and how this affects them".
"We're communicating with relevant agencies about this, and working with them towards developing appropriate solutions."
Recruitment company Coverstaff sales and marketing director Clive Murden said some firms working in the rebuild were "essentially employing people but actually taking them on as contractors".
Christchurch's Labour Inspectorate is looking into the issue as part of a series of audits of companies involved with the rebuild.
Part of MBIE, the inspectorate is running the ruler over companies to check they are complying with employment laws.
Inspectorate regional manager Steve Watson said that it was looking at workers' contractual agreements.
You should be an employee if:
The employer has control over your hours of work and where the work is done
Your work is supervised
The employer supplies the materials or equipment you need to do the work
You can be prevented from working for another employer at the same time
You do not pay overhead costs
You can't hire someone to help you (only your employer can).
IS IT LEGAL?
Taylor Shaw partner Kathryn Dalziel says it is acceptable to employ staff as independent contractors. However, if the independent contract is effectively a sham and the real nature of the relationship is one of employer/employee, the courts can and will overturn it, Dalziel warns. "This can leave an employer with a rather large bill for arrears of PAYE and holiday pay."