In September 2024, the Government announced changes to the Employment Relations Act 2000 that will introduce a new gateway test to determine whether a worker is an employee or an independent contractor. These reforms are designed to provide greater clarity for both businesses and workers, and are expected to become law in 2026.

The gateway test will serve as the starting point for assessing employment status. If all criteria are met, the worker will be classified as a contractor. If any criteria are not met, the existing tests will continue to apply.

Under the proposed changes, a worker will be considered an independent contractor if all of the following apply:

• There is a written agreement that clearly designates the worker as an independent contractor.

• The business does not restrict the worker from providing services to other businesses, including competitors.

• The business does not require the worker to be available at specific times or for a set number of hours, and allows subcontracting of the work.

• The business does not terminate the contract if the worker declines additional tasks or engagements.

Once the gateway test is formally enacted, business owners should ensure all four criteria are satisfied when engaging someone as a contractor.