By Greg Allan, tradesman and creator of Data First Coaching
Is the extra pair of hands on an emergency callout an employee or a contractor?
Most locksmith businesses reach for extra help when the callout board fills up: an after hours emergency, a lockout at two in the morning, a strata rollout that needs two vans on site instead of one. The instinct is to call that person a contractor because it feels simpler than putting them on wages. A written agreement that says “contractor” does not settle the question on its own.
Employment New Zealand runs this through what it calls the gateway test: a worker only counts as a contractor under that test if the written agreement meets every one of its criteria, including that they can choose when to work, can decline extra work without the arrangement ending, and had a real chance to get independent advice before signing. If even one of those criteria is missing, the common law test applies instead, and the label on the paperwork stops being the deciding factor. See Employee or contractor? for the full detail.
Why does getting the label wrong quietly wreck a locksmith's margins?
A locksmith business that brings in extra hands for a commercial access control job or a big strata rekey often treats the arrangement as settled once the invoice comes in. But Inland Revenue's own guidance is clear that there is no single test, and that the actual working conditions decide the answer, not what either party calls it on paper. Self-employed or employee lists the practical questions: who provides the van, the key cutting machine and the tools, who sets the hours, who decides how the job on site gets done.
Where this starts to hurt is in the job costing. A locksmith who quotes a commercial install or a master key system on a certain margin, then pays a contractor who is really working like an employee, under direction, on the locksmith's hours, in the locksmith's van, has a labour cost that does not match what the job actually needed. The quoted margin on that rekey or that access control install stops telling the truth, and the next quote built on the same assumption repeats the same mistake.
What tests actually decide employee or contractor status in New Zealand?
You do not get to choose the test; Employment New Zealand and Inland Revenue use layered tests, and for a locksmith business the detail matters because callout work, after hours work and one-off restricted key jobs can each look different under them. Start with the gateway test: if the person you bring on for a lockout overflow or a strata job has a written agreement, can work for other locksmiths too, chooses when they work, and can turn down extra jobs without the arrangement ending, they can be treated as a contractor.
If any part of the gateway test is not met, Inland Revenue's interpretation guideline sets out the common law tests instead: a control test that looks at how much say you have over the way the work is done, an independence test that looks at how much that person runs their own show, and a fundamental test that asks whether they are genuinely in business for themselves. The more you direct how a digital lock install or a security door job gets done, on your hours, in your van, the more that person looks like an employee under IR's interpretation guideline, whatever the invoice says.
Inland Revenue's own guide for new employers is direct about the risk of getting this backwards: “It is illegal to treat a true employee as self-employed to avoid deducting tax.” A genuine contractor, by contrast, usually invoices you and is paid through schedular payments rather than wages, as set out in New employer information - IR333.
How do you keep a contractor's cost as honest in your numbers as an employee's wage?
This decision usually shows up at a specific point in a locksmith business's growth: the point where you personally cannot cover every after hours emergency, every commercial access control job and every real estate lockout, and still find time to quote, order stock and run the office side. That is a growth phase decision about filling a capacity ceiling, and Greg teaches that it should follow proven capacity and known costings in your own numbers, not whichever subbie or mate is free that week.
Whether the extra set of hands on a strata rollout or an emergency callout ends up on wages or on an invoice, the test that matters for your business is the same one you use for employee or contractor status: is that cost showing up honestly against the job it did. AI agents, software that does a job the way you would, using your own prices, wording and rules, can pull every callout, rekey, master key and commercial install into one place and tag the labour cost against it, regardless of whether the labour came from a wage or a contractor's invoice. Another one of these AI agents can flag when a contractor's hours on a big access control job have quietly eaten the margin the quote assumed, before the job gets closed off and the number is forgotten.
Greg coaches locksmith business owners online, starting from their own data, so whether the business is based in Auckland or anywhere else in New Zealand, the coaching works the same way. Working this out data first, from what each job actually cost rather than from memory once the quarter's PAYE or GST is due, is what keeps a quoted margin on a rekey or a restricted key system meaning something when you look back at it.
This is general information, not legal, tax or employment advice. Check your own situation with the body named here or a qualified adviser.
Where can you check the current rules?
- Employee or contractor? - Employment New Zealand's gateway test and common law test for deciding whether a worker is an employee or a contractor.
- Self-employed or employee - Inland Revenue's own guidelines and practical questions for working out self-employed or employee status.
- ACC levies - Business.govt.nz's explanation of ACC cover and levies for the self-employed, including CoverPlus and CoverPlus Extra.
- IG 16/01: Determining employment status for tax purposes - Inland Revenue's interpretation guideline setting out the control, independence and fundamental tests.
- New employer information - IR333 - Inland Revenue's guide to registering as an employer and schedular payments to contractors.
- New employer's guide IR335 - Inland Revenue's guide on PAYE obligations and the risk of treating an employee as self-employed.
How does Data First Coaching approach this?
Data First Coaching, built by Greg Allan, starts this question from the locksmith's own job and finance data rather than from a checklist. Through the Trade Business Intelligence it looks at what each job, from a lockout to a commercial access control rollout, actually cost once labour is tagged correctly, whether that labour was a wage or a contractor's invoice, and where the quoted margin and the real margin quietly pulled apart. Often the classification question is a symptom of a deeper gap in how costs get captured against jobs in the first place. The how, worked through with the owner's own numbers, is taught inside the Academy, among members who are open minded, innovative and willing to share what they learn, because the Trade Business Intelligence is powered by every member.
