Contractor vs employee in NZ: which leaves you better off?
Higher day rate, fewer protections — contracting isn't automatically the better deal. Here's how the real numbers stack up.
By the KiwiSums team
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Published 22 July 2026
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Updated 22 July 2026
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6 min read
The headline pay gap
Contractors typically charge a day or hourly rate that looks noticeably higher than an equivalent salaried role — often 20-30% more once converted to an annual-equivalent figure. That premium exists for a reason: it's meant to cover everything an employer would otherwise provide.
What contracting actually costs you
As a contractor, you're covering your own ACC levies, getting no paid annual or sick leave, receiving no employer KiwiSaver contribution, and carrying the risk of gaps between contracts. Add GST registration and basic business admin, and a meaningful chunk of that higher rate is already spoken for before it feels like "extra" income.
"The higher rate isn't extra money — it's the money that used to come from somewhere else, now routed through you."
What employment gives you that contracting doesn't
Employees get paid annual and sick leave, a compulsory employer KiwiSaver contribution on top of their pay, more predictable income, and generally less personal admin. The trade-off is typically a lower headline rate and less flexibility over how and when you work.
Which matters more to you?
If security matters most, employment's paid leave, employer KiwiSaver and predictable income are hard to replicate as a contractor — model the real numbers in the contractor vs employee calculator before deciding.
What you can do now
- Run the real comparison. Use the contractor vs employee calculator to compare take-home pay properly, not just the headline rate.
- Know your take-home either way. Check the take-home pay calculator for the employee side of the comparison.
- Don't forget KiwiSaver. See what losing the employer contribution means long-term in the KiwiSaver calculator.
- If negotiating a raise instead, check the impact. See the pay rise calculator for what a raise actually adds to your take-home pay.
Written by the KiwiSums team
We build plain-English calculators for New Zealand money decisions. This explainer is general information, not financial advice — figures are illustrative and simplified for clarity. Talk to your bank or a licensed adviser about your own situation.
Assumptions & sources
General NZ contracting market rate conventions; IRD guidance on contractor tax and GST obligations; standard KiwiSaver employer contribution rules.
22 July 2026
22 July 2026
The 20-30% contractor rate premium is a common market convention, not a guarantee — actual rates vary by industry, experience and demand. Use the contractor vs employee calculator for figures specific to your situation.
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Read article →Frequently asked questions
A common rule of thumb is 20-30% more than the equivalent annual salary (converted to an hourly/day rate) to cover paid leave, KiwiSaver, ACC and the lack of guaranteed hours — though it varies by industry and how much non-billable admin time you expect.
Contractors can still contribute to KiwiSaver themselves, but they don't get the compulsory employer contribution (minimum 3%) that employees receive on top of their pay.
It depends on your risk tolerance and how consistently you can find work — the higher headline rate can work out ahead if you stay busy, but income gaps, no paid leave and covering your own ACC can erode the advantage. Compare your specific numbers in the contractor vs employee calculator.
