Contractor vs Employee
differences between contractor and employee
Contractor vs Employee
When hiring it is important for a company to consider whether they are hiring an Employee or an Independent Contractor.
There is a fundamental difference between the two and they are governed by different legislation.
Employee
An employee is an individual that is hired under an employment agreement where you are expected to work regular hours and will either receive a wage or a salary.
In an employer/employee relationship there is an expectation on the employee to go to work on their agreed start time and there is an expectation on the employer to meet all employer obligation.
Contractor
A Contractor or an Independent Contractor is someone who is engaged to perform services when required. The Independent Contractor has the freedom to decide whether they want to provide the services required. An independent contractor does not require an Individual Employment Agreement but they will need to an Contract for Service agreement to set out the engagement terms.
Contractors are essentially self- employed therefore they are also required to pay their own taxes and will not be entitled to any minimum entitlements under the Holidays Act 2003.
Legislation around this area has recently changed. Previously, the test to determine whether an individual is an Independent Contractor or Employee is a common law test where you have to look at:
· The intention of the arrangement
· Control vs Independence of the arrangement
· Integration
· Fundamental/economic reality test
As of February 2026, the government introduce the GATE test. If the individual meets the requirements under this test then they are considered as a Contractor.
The GATE test:
· Have a written agreement that confirms that they are an independent contractor
· Whether the individual is permitted to work for any other individuals
· Whether they have the flexibility to choose the work they wish to take on or whether they are allowed to subcontract their work
· Have the ability to decline extra work without ending the current arrangement
If you are unsure which arrangement would be more suitable for your organisation please get in touch and we can assist and guide you through the process.
For further updates and information please keep an eye out on our website in the coming year or feel free to contact us.