Stop the Contractor Bill
16 August 2016
Contractor Bill confused
The Contractor Bill - the Minimum Wage (Contractor Remuneration) Amendment Bill - could be passed in Parliament shortly.
- It is trying to ensure that all contractors receive an equivalent of the Minimum Wage.
- It’s based on a confusion about how contracts work.
- The Contractor Bill assumes a contractor always has only one contract with one client, and assumes that the single client should be paying an equivalent of the minimum wage or more.
- But most contractors provide their services to many businesses, not just one. For example, an electrician providing a mix of different services to multiple clients - over a working week, the electrician might engage with many different businesses or clients, to earn a combined total income well above the minimum wage.
- The Contractor Bill also assumes that many contractors are actually employees and so should get minimum wage protections (it assumes they have agreed to an illegal contract). But there is already legislation to protect people who are illegally engaged as contractors so the Contractor Bill is not needed for this.
Restrictions on contracts
The Contractor Bill would place restrictions on contracts, requiring any payment terms to be higher than the minimum wage. This sounds like a good protection to have, but in practice it would simply harm many industries.
What would be the result if the Contractor Bill was passed?
Unworkable contracts - It would make many contracts unworkable, for example it would affect the ability of contractors to provide the option of discounting their services for valued clients, because the state would be setting the minimum price of a contract.
Industry costs - It would mean contract work would be unable to be carried out in many industries, causing confusion and uncertainty in industries based on contract work, e.g. building, construction, manufacturing, forestry, cleaning services, transport and delivery and many others
Removing choice - It would remove the choice for contractors to price a job in in a way suitable for them and would lead to many smaller scale contracts not being performed at all.
Blurring the line between contracts and employment agreements - It would mean contracts for services would have to specify rates of pay per timeframe. This would require new tax rates for contractors and would also require other employment laws to be applied to contractors.
Confusion with employment agreements
The correct place to have minimum wage protections is in employment agreements. Every employment agreement in NZ must pay at the minimum wage or higher. This is a practical protection for every NZ employee.
It’s not practical to try to put minimum wage protections in contractors’ contracts. Doing so would prevent contracts from working properly, and would cause widespread confusion between between contracts and employment agreements.
Stop the Contractor Bill
The Contractor Bill is a private member’s Bill put forward by the Labour Party, and supported by the Green, NZ First and Maori Parties. It is opposed by National and ACT.
The recent decision by Peter Dunne MP to support the Contractor Bill means it now has a majority of one vote in Parliament and could therefore become law next week.
It is important that public attention is drawn to the destructive effects of the Contractor Bill.
What is a contract?
A contract is a voluntary agreement that can be for any purpose that is legal, over any timeframe, and may or may not involve payment. A contract can be for charitable, personal, business or many other purposes. Marriages, civil unions, insurance policies, loan agreements and trust agreements are all examples of contracts. The flexibility of what a contract can do - and how - is the reason why it is used extensively in business and personal affairs. The proposed legislation would restrict many contracts and make them unworkable and cause confusion, uncertainty and huge costs in many industries.
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