By Greg Allan, tradesman and creator of Data First Coaching
What does it actually cost a fencing business to get this wrong?
Whether the person swinging the auger on a boundary fence is an employee or a contractor is not only a legal label. It decides whether that person's cost lands in cost of sales or gets buried in overhead, and a fencing business can show a healthy gross profit on a job while the bank account tells a different story.
Most fencers do not think about this until a question comes from IRD or from a worker asking about holiday pay. By then the job that looked profitable, the long rural fencing run or the pool fence install done under time pressure, has already been quoted and invoiced with the wrong cost sitting in the wrong place. The margin was never what the job sheet said it was.
Why do so many fencing businesses end up with a mix of employees and contractors?
Fencing work swings hard between quiet stretches and long runs, so most fencing businesses end up with a core crew on wages and a changing group of contractors brought in for panel install, post hole work or trailer runs when the work is on. That mix is normal. The trouble starts when the business does not treat the two groups differently on its own numbers.
A dividing fence job between two neighbours might need one extra set of hands for a week. A rural fencing contract might need several steel post and footing crews for a month. Whoever turns up, employee or contractor, their cost has to land somewhere on the job, and most fencers are busy enough running the auger and the trailer that nobody is checking where it lands until the end of the quarter.
How does New Zealand decide if the person on your crew is an employee or a contractor?
You start with the gateway test. Employment New Zealand says you can use this test first, and if the worker meets every criterion in it, they are treated as a contractor. If they do not meet all of it, you then move to the common law test, which Employment New Zealand describes as four legal tests looking at the true nature of the working relationship, Employee or contractor?.
The gateway test is recent, so if a contractor arrangement with someone on your crew started before it came into law, Employment New Zealand says you can rely on the common law test for the period before that date and both tests from that date onward, Employee or contractor?.
For tax purposes, IRD says there is no single test, and what you or the worker call the arrangement in a contract does not settle it. IRD points to indicators on both sides: whether the person can bring in their own help and pay them, whether they can take on other work and advertise for it, against whether they have to do the work themselves, whether you can direct how and when the job is done, and whether they are paid at a set rate, Self-employed or employee. IRD's own interpretation guideline sets out a control test, looking at how much say you have over the way the work is done, and a fundamental test, asking whether the person is really in business on their own account, IG 16/01.
This is general information, not legal, tax or employment advice. Check your own situation with the body named here or a qualified adviser.
What does this mean for your fencing business's gross profit?
Once you know whether someone is an employee or a contractor, the next question is where their cost sits on your own numbers, and that matters more to your margin than the label itself. A wage paid to the person cutting post holes and a contractor invoice for a trailer run both belong in cost of sales, against the job they worked on, not folded into general overhead where nobody connects it back to a specific boundary fence or pool fence quote.
This is the data first part of running a fencing business. If labour cost, whatever form it takes, is not captured against the right job, every quote looks like it made good gross profit right up until the bank account disagrees. A fencer checking this from memory at the end of a busy month is working from an old picture. Checking it from the job and pay data as the work happens tells the truth in real time, panel by panel, run by run.
How can AI agents carry this paperwork for your fencing business?
An AI agent is software that does a job the way you would do it yourself, using your own prices, your own wording and your own rules, so it can take on the paperwork that sits behind every contractor or employee on your crew without you doing it by hand. For a fencing business that means site inductions, incident records, onboarding forms and job notes kept against the right job and the right person, employee or contractor, as the work happens.
Picture a fencer whose team paperwork, inductions, incident records and onboarding, used to sit scattered across different folders and a separate messaging app, so nobody could say with certainty who had done what induction on which site. The owner built his own tool that pulls in job information and brings the forms, the site-specific inductions, the incident register and onboarding into one place, so when a new post hole crew member or contractor turns up on a rural fencing job, the record is already there waiting, not chased up after the trailer has left the yard.
AI agents like this do not decide whether someone is an employee or a contractor. That decision still rests on the tests above. What they can do is make sure the paperwork and the cost record for whoever you bring on is right from day one, instead of being rebuilt from memory when IRD or a worker asks.
Where can you check the current rules?
- Employee or contractor? from Employment New Zealand, covering the gateway test and the common law test.
- Self-employed or employee from IRD, covering the indicators IRD uses for tax purposes.
- IG 16/01 from IRD, covering the control test and the fundamental test in detail.
- Employment changes: what you need to know from Business.govt.nz, covering what the gateway test looks at.
How does Data First Coaching approach this?
Data First Coaching starts with the fencing business's own job and pay data, through the Trade Business Intelligence, to see where labour cost is actually landing, wages or contractor invoices, job by job, before anyone argues about classification. Often the real issue is not whether a person is an employee or a contractor, it is that the cost never made it into cost of sales at all. Greg Allan, who built his own trade business before coaching others, teaches that “understanding that is the spreadsheet”, because that is what tells an owner whether bringing someone on is actually affordable before the work starts. The how of setting this up is worked through inside the Academy, with members, because the Trade Business Intelligence is powered by every member who joins it.
