Stats NZ has a new website.

For new releases go to

www.stats.govt.nz

As we transition to our new site, you'll still find some Stats NZ information here on this archive site.

  • Share this page to Facebook
  • Share this page to Twitter
  • Share this page to Google+
Definition

Status in employment classifies employed people aged 15 years and over according to whether they are working for themselves or for other people.

The following are supporting concepts defined in Glossary and references:

  • employed
  • employee
  • self employed
  • employer.

Operational issues

In the New Zealand context self–identification or respondent identification is the most important method of determining status in employment. If a respondent selects a category without question or comment, this is accepted at face value unless obviously in conflict with answers to other questions. Relying on respondent self–identification is the most efficient way of collecting employment status information, although it does mean that a certain proportion of respondents classify themselves incorrectly. It is considered impractical to apply strict legal tests or specific questions of tax treatment in determining status in employment from a generalised questionnaire and therefore the principle of self–identification is likely to continue. This however does not preclude using specific questionnaire wording or help notes to assist respondents in determining their employment status from the categories available. It should be noted that status in employment information is surveyed in personal and business surveys. In the case of personal surveys the respondent is asked to identify their own status. In the case of business surveys the respondent is asked to supply information for all those people engaged in a particular enterprise.

Business collections which include employment questions do not differentiate by age and in theory may include data for people younger than 15.

Most collections that include status in employment only survey this for the main job the person holds. However surveys may capture this variable for all jobs, for example, the Income Questionnaire to the Household Economic Survey.

Explanatory notes

The statistical standards for labour force status and status in employment are closely related and they share the same definition of employed. Labour force status classifies people according to their inclusion or exclusion from the labour force. Status in employment examines those people in the labour force who are employed.

Much of the interest in status of employment surrounds the treatment of groups that are close to the boundary between being self-employed or employees.

The overriding criteria for distinguishing between an employee and a self employed person are the level of financial risk the person is subject to in their work and the amount of control they exercise over what they do and how and when they do it. A worker who assumes all or some of the risk in operating an economic entity is likely to be an employer or self employed. If a worker controls what work they do and how and when it is done they are probably either self–employed or an employer. When a worker does not assume any financial risk in the employing entity and others decide what work they will do and how and when it is done they are probably an employee.

Owner managers

Owner managers can be regarded as self employed or employees depending on the level of financial risk they face and the level of control they exercise in the jobs they hold.

In larger companies the owner manager’s level of financial risk and control is generally limited to the size of their share holding which is often not a controlling interest. They may be employed in a managerial position and be remunerated by way of a salary or wage akin to an employee although they also receive a share of the profits as a shareholder. They may generally be regarded as employees although they also have some similarities with the self–employed and employers.

In small companies, family companies, sole proprietorships and partnerships owner managers generally bear most if not all of the financial risk, they have a stronger controlling interest and their remuneration is more directly related to profits. Accordingly, they are generally regarded as self employed or employers.

The System of National Accounts regards the owner managers of larger corporate companies as having an employment status of employees. Owner managers of smaller and family companies are generally regarded as self employed or employers.

From a labour statistics point of view owner managers are generally classified with the self-employed or employers. The Quarterly Employment Survey follows this approach.

An inquiry by the International Labour Organisation (ILO) carried out in 1997 into national practices for status in employment found that most countries treated owner managers of incorporated enterprises as employers, but some countries indicated this might depend on the type of contract or the responses given by the person during enumeration.

Contractors

The overriding criteria for deciding if a person is an employee or self employed are the:

  • nature of the contract – whether for employment or for the provision of services
  • level of control exercised over how the job is done by the person concerned
  • level of financial risk faced by the person in their job

Under the Employment Contracts Act an employee is covered by the Act but own–account workers or independent contractors are not. There are several factors that the Employment Court takes into account when trying to determine whether a worker is an employee or self-employed these include:

  • a) Whether the parties to the contract intended it to be a contract of employment or a contract for services.
  • b) The degree of control which an alleged employer exercises over the operation of the contract. e.g. in determining when and how services are performed.
  • c) Whether the person performing the services provides their own equipment.
  • d) Whether the person performing the service can hire their own helpers.
  • e) The degree of financial risk taken by the person performing the services.
  • f) The degree of responsibility for investment and management taken by the person providing the services.
  • g) The level of integration of the activities of the alleged employee and the business of the employer.

There is no one over–riding criteria that can be used to distinguish between a person employed on their own–account or as an employee. The understanding of both parties as to the nature of the contract should be the first basis for classification.

The IRD also classifies workers according to their status in employment for tax purposes. For those whose status is unclear, a set of questions is provided to help them determine this. These questions cover issues related to the control exercised in the job and financial risk faced by the jobholder.

As stated previously, for most surveys self–identification is likely to continue as the main means of distinguishing between employment and self–employment. Help notes designed around the criteria above may assist the likes of contractors in determining their employment status.

Franchisees

This group consists of workers whose operating contracts determine how they will work and require that a share of their income or operating fee is remitted to a license holder (the franchiser). Such workers may be regarded as self–employed – they carry the financial risk and own the plant and equipment – although their operational working conditions in many respects are essentially similar to employees. In coming to a decision on employment status the same criteria as in the case of contractors could be used.

According to the 1997 ILO study into national practices for status in employment most countries treat Franchisees as self employed.

Home-workers

Home-workers are people formally working in homes under employment laws. Under New Zealand law, a home–worker can have either a contract of service or a contract for services with the person they undertake the work for. In other words, they may be either an employee or an independent contractor.

The Employment Contracts Act (ECA) explicitly provides for home–workers to be subject to its provisions even though their contract might technically be between vendor and purchaser (Employment Contracts, 1-8(e)). This means that all home-workers have access to personal grievance and dispute procedures, for example. However, the other employment laws do not identify home–workers as a special category. Whether or not a home–worker is entitled to paid holidays, wage protection, parental leave and various other rights of employees depends on the nature of their contract.

Unpaid family worker

The category unpaid family worker is relatively less significant than the employee and self employed categories although there is still user demand for separately identifying this.

The International Classification for Status in Employment (ICSE 93) defines a category for contributing family workers. A contributing family worker may or may not be remunerated, in money or in kind. The crucial distinction between a contributing family worker and an employee is that a contributing family worker has no guarantee of a basic remuneration that is independent of the profitability or sales of the business. The crucial distinction between a contributing family worker and a self-employed person is that the family worker does not work on an equal basis with the heads of the family business and cannot be regarded as having a controlling interest in the business. It might be difficult in practice to collect results for a category 'contributing family worker paid or unpaid' as defined in ICSE. There is likely to be confusion between this category and the employee and self employed categories.

Australia has a category 'contributing family worker'. This is essentially the same as the category unpaid family worker used in New Zealand.

On balance the category unpaid family worker should be retained to continue the existing time series and this also retains comparability with the Australian classification.

  • Share this page to Facebook
  • Share this page to Twitter
  • Share this page to Google+
Top
  • Share this page to Facebook
  • Share this page to Twitter
  • Share this page to Google+