Contractors and Employment

February 2020

Editorial: The Contractor Scourge

by Harald Breiding-Buss

One of the articles this week summarises some of the trends we see in what organisations pay staff and contractors. Overall, if someone is employed as a ‘contractor’, they seem to get paid significantly more per hour of work, even considering employee entitlements that contractors don’t have. I suspect that some of these are ‘guilt rates’: the organisation knows that it puts all the risk and compliance on the contractor, when they probably shouldn’t, and compensates by making significantly higher payments.

Whenever I see contractors being used for tasks, that are core or ongoing for the organisation, I tend to recommend having a look at this, and perhaps even talking to a lawyer. There’s no doubt that having one or more employees is onerous for voluntary boards or committees to deal with, and Inland Revenue compliance has become significantly worse last year for small groups with the introduction of payday filing. Using a ‘contractor’ arrangement is an easy way out, although the Employment Court has on occasion ruled that such ‘contractors’ are really employees and entitled to all the benefits and protections the law gives employees.

Sometimes contractor arrangements are what both parties genuinely want and should do, but they are mostly a big step backwards. Employee entitlements such as paid holidays, sick leave, protection from unfair dismissal, minimum pay and others now protect us from the kind of exploitation and poverty that was mainstream before unions came on the scene. We love to hate unions now, because we have the luxury of being able to forget what working conditions used to be like.

I feel uneasy that not-for-profit organisations especially are circumventing employment protections for reasons of convenience. I also think that one of the rewards for an organisation of choosing employment rather than contracting is higher loyalty of the staff member.

February 2020

Are You Paying Your Staff Enough?

Conventional wisdom says staff in not-for-profits are paid less than equivalent staff in business. However, there is no good data in New Zealand to back or debunk this claim.

Part of the problem is that pay for relatively equal skill requirements varies widely with a number of factors. Amongst these is the size of the business. As a general rule, large businesses will pay more than small ones.

A further problem is that a lot of jobs in community groups do not have true equivalents in the small business world. Small businesses, as a general rule, do not have paid administrators or coordinators. These functions are generally performed by the owners. Social or youth workers are almost exclusively not-for-profit jobs, or they are employees of large government departments.

At CCA we are working with hundreds of not-for-profits that employ people. What we observe here is:

  • It is rare that we see anyone paid the minimum wage only.
  • Compliance with holiday pay, pay for statutory holidays, and Kiwisaver is high in the not-for-profit sector – you are probably more likely to get your full entitlements working in a not-for-profit than in a small or medium business.
  • Contractor arrangements are common amongst our clients, and payments for coordination, funding or finance-type tasks average about $40-$50 per hour. The same jobs handled by employees are paid between $23-$28, significantly less even when taking employee benefits into account.
  • Hourly rates for jobs involving the management of several staff or volunteers, or any sole charge position with or without reporting staff, are usually between $30 – $40.
  • Rural organisations pay significantly less than those in metropolitan Christchurch for the same jobs.