By Greg Allan, tradesman and creator of Data First Coaching
Why does it matter whether the CNC operator or install crew are contractors or employees?
For a cabinetmaking business, this is not a paperwork question, it is a cost structure question. The labour that goes into a kitchen, wardrobe or vanity quote sits alongside board, edging and hardware, and whether that labour comes in as a contractor invoice or an employee wage changes what the job actually costs once the deposit is banked and the install day is done.
Most cabinetmakers set up a job price assuming the margin will hold, but a worker's status can shift which costs sit inside the job and which sit outside it. A business that has priced install days around what it thought was a casual arrangement, then finds that arrangement is actually an employment relationship, can discover the real cost of that labour was higher than the quote assumed.
A common trap is waiting until the business can clearly afford a wage before deciding whether install or CNC work should sit on the books as an employee, rather than looking at what the workshop and install schedule actually need week to week. The decision gets made on a guess about affordability instead of on the capacity the business is genuinely filling.
What test does New Zealand use to decide if someone is a contractor or an employee?
Employment New Zealand first applies a gateway test, and if a worker meets every criterion in it, they are treated as a specified contractor. If the arrangement does not meet all of that test, a four-part common law test is used instead to work out the true nature of the relationship, according to Employment New Zealand.
The gateway test needs several things to line up at once for a subbie doing site measures or install days: a written agreement stating they are an independent contractor and not an employee, freedom to work for other businesses as well, the ability to choose when to work or to subcontract the work out, the right to turn down extra work without the arrangement ending, and a real chance to get independent advice before signing.
Employment New Zealand also makes clear the gateway test only applies from when it came into law, in the early part of twenty twenty-six, and it is not retrospective. For a subbie or install crew member who was already working with a cabinetmaking business before that date, the earlier period of that arrangement is judged under the older common law test, with the gateway test available from that date on.
What does IRD look at to decide if someone is self-employed or an employee for tax?
According to Inland Revenue's interpretation guideline IG 16/01, IRD weighs up four tests for tax purposes: how much control the cabinetmaking business has over how the work is done, how independent the worker is in running their own business, whether the worker is genuinely in business on their own account, and whether the worker is integrated into the business or sits as an accessory to it.
Crucially, IRD says a written contract stating someone is a contractor may show intention, but it is not the deciding factor. A cabinetmaker who has a subbie agreement on file for the person doing site measures or install days cannot rely on that paperwork alone if the real working arrangement looks like employment in practice.
Inland Revenue puts it plainly too: there is no single test, and the working conditions in the contract or agreed verbally decide status, not simply what the job is called on the roster or the quote.
This is general information, not legal, tax or employment advice. Check your own situation with the body named here or a qualified adviser.
How does this change the margin on a kitchen or wardrobe quote?
You price a kitchen, wardrobe or vanity job by building labour in alongside board, edging, laminate or two pack finish and hardware, and the margin you quote only holds if the labour cost in that quote matches what actually leaves the business once the job is invoiced. If the person running the CNC or doing the install is really an employee once IRD's tests are applied, the true labour cost includes things a contractor invoice does not carry.
Knowing your true costings before deciding how to resource install or CNC work means you can see, job by job, what a contractor invoice versus an employee wage actually does to that job's numbers, rather than assuming one option is simply cheaper because the paperwork looks lighter. Across the workshop floor, the only way to know which suits a particular run of kitchens or wardrobes is to test it against real job numbers, not instinct, over a defined run of work.
How can AI agents help a cabinetmaking business keep this straight?
An AI agent is software that does a job the way you would do it yourself, following your prices, your wording and your rules, rather than a generic form someone fills in once and forgets. AI agents can sit at the point where a site measure, install day or CNC job gets booked, and check the right paperwork is on file before the job starts.
For a cabinetmaker running a workshop crew alongside a handful of subbies for install days, that means making sure an IR330 is held for an employee or an IR330C for a contractor, as IRD's employer's guide IR335 sets out, rather than chased up after the invoice is raised.
AI agents built to carry that paperwork your way, pulling from your own job and pay data rather than memory, are the data first approach: the record sits against the job from day one, not reconstructed at year end when IRD or a client asks who did the work.
Where can you check the current rules?
- Employee or contractor?, Employment New Zealand's page on the gateway test and the common law test, and when each applies.
- IG 16/01: Determining employment status for tax purposes, Inland Revenue's interpretation guideline on the control, independence, fundamental and integration tests.
- Self-employed or employee, IRD's page confirming there is no single test and working conditions decide status.
- IR330C Tax rate notification for contractors, the form a contractor completes for each source of contracting income.
- IR335 Employer's guide, IRD's guide on which forms employees and contractors must give a business.
How does Data First Coaching approach this?
Data First Coaching starts from a cabinetmaker's own job and pay data, not from a guess about whether a worker is a contractor or an employee. Greg Allan's Trade Business Intelligence looks at what the CNC operator, site measure crew and install days actually cost against each kitchen, wardrobe or vanity job, and finds whether the real problem sits in how a worker is engaged or somewhere earlier in how the job was quoted. Greg talks about “understanding the efficiency of working” before changing how someone is resourced, rather than guessing. Cabinetmakers across New Zealand and Australia work this way online, so where the business sits never changes how the coaching runs. The how of sorting it is worked through inside the Academy, among members open minded enough to share what they learn.
