New employment law that passed on 21 February 2026 has significantly changed how contractor agreements work in New Zealand — and if you run a trade business and use subbies, your contracts may already be out of date.
The Employment Relations Amendment Act 2026 introduced a new statutory category called the "specified contractor". Under this change, if a contracting arrangement properly meets the gateway test requirements, the worker is legally classified as a contractor and cannot challenge that classification through the Employment Relations Authority (ERA) or the Employment Court. This is a major departure from the previous position, where courts could look behind the label regardless of what a contract said.
For trade business owners, this is both an opportunity and a responsibility. Get it right and you have genuine legal certainty. Get it wrong and you're still exposed — possibly more so than before.
What Changed (and What Stayed the Same)
The gateway test itself — the four-part check used to determine whether someone is a contractor or an employee — remains in place. What has changed is the legal consequence of passing it.
Previously, even if a contractor arrangement ticked all four boxes, a worker could still apply to the ERA to be declared an employee based on the "real nature" of the relationship. Courts had wide discretion, and results were unpredictable. That avenue is now effectively closed for arrangements that genuinely satisfy the new statutory requirements.
To qualify as a "specified contractor" under the 2026 Act, a written agreement must include all of the following:
- Freedom to work for others — the contractor is not restricted from working for competing businesses or other clients
- Flexibility around time or the ability to subcontract — the contractor controls when they work, or can send someone else in their place
- A reasonable opportunity to seek independent advice before signing the agreement
If all three elements are present in a properly written agreement, the arrangement has strong statutory protection. The worker is a contractor by law.
Why Your Old Contracts May Not Cut It
Contracts written before February 2026 were drafted against the old legal landscape. Many standard subcontractor agreements — especially the template-style ones common in the construction and electrical trades — do not explicitly address all three of the new statutory elements. They may reference the gateway test in general terms, or simply include a line saying "you are an independent contractor," without spelling out the specific freedoms required.
If an agreement doesn't meet the new statutory requirements, the arrangement does not qualify as a "specified contractor" arrangement, and the old uncertainty still applies. You lose the benefit of the new law entirely.
The Employment Relations Authority has already signalled it will look carefully at whether agreements genuinely reflect the new requirements, not just whether they include the right buzzwords.
If you use subbies — whether you're a building company, an electrical contractor, a plumbing business, or a painting firm — it's worth reviewing your standard subcontractor agreement against the new criteria. Not sure whether your current arrangements are at risk? Our Contractor vs Employee Calculator can help you assess where your arrangements sit before you speak to a lawyer.
The High-Income Threshold Change
The 2026 Act also introduced a new high-income threshold. Employees earning NZD $200,000 or more per year can no longer bring personal grievance claims for unjustified dismissal. This is unlikely to affect most tradespeople directly, but it is relevant to larger construction companies with senior site managers, project directors, or commercial estimators on high salaries.
This threshold mirrors similar provisions in the UK and Australia and is intended to reduce the risk premium associated with hiring senior talent on employment agreements in New Zealand.
What the Ministry of Business, Innovation and Employment Says
MBIE has published updated guidance on the changes via its employment.govt.nz platform. The guidance confirms that trade businesses should:
- Review and update written agreements for any contractor they engage regularly
- Ensure agreements are signed before work begins, not after
- Keep copies of signed agreements on file in case of a dispute
- Not rely on verbal agreements or industry custom — the statutory protections only apply to properly documented written arrangements
The Employment New Zealand website (managed by MBIE) has a checklist tradies can use to self-assess their contractor arrangements. That checklist has been updated to reflect the 2026 requirements.
Practical Steps for Trade Business Owners
Here's what you should do if you use subbies:
1. Audit your existing agreements. Pull out every subcontractor agreement you currently have in place. Check whether it explicitly covers freedom to work for others, flexibility of hours or the right to subcontract, and whether the subbie was given a reasonable opportunity to get independent advice before signing.
2. Update any agreements that fall short. Have a solicitor or employment law specialist redraft the relevant clauses. This does not need to be expensive — many NZ employment lawyers offer fixed-fee contract reviews starting from around $300–$500 plus GST.
3. Get new agreements signed. For ongoing relationships where the old agreement doesn't meet the new requirements, issue updated agreements as soon as possible. Under the 2026 Act, a worker who has been performing work under a non-compliant agreement can still apply to the ERA if a dispute arises before a compliant agreement is signed.
4. Don't confuse the legal classification with the tax obligation. Even if your subbies are correctly classified as contractors under employment law, IRD still applies its own tests to determine whether PAYE should be deducted. These are separate frameworks. A "specified contractor" may still be a "schedular payment" earner under the Income Tax Act, requiring you to deduct withholding tax. For a refresher on what you can claim and how contractor tax works, see our NZ Tradie Tax Guide and the previous Gateway Test explainer.
5. Use the right tools to track rates. One downstream benefit of proper contractor classification is that you can negotiate and manage contractor rates more flexibly. Our Hourly Rate Calculator is useful for working out what you need to charge (or pay) to cover your actual costs.
Fastcrew for Managing Contractor Records
Keeping compliant contractor documentation isn't just a legal exercise — it's also a workflow challenge. Fastcrew is an NZ-built app for managing your crew, including subbies, and it allows you to store signed agreements, track who is on site, and manage payment records in one place. Given that the 2026 Act places significant emphasis on the existence of a properly documented written agreement, having a system for storing and retrieving those records quickly is genuinely valuable.
Download Our Free Contractor Agreement Template
Download our free NZ tradie templates — including a subcontractor agreement template updated for the 2026 Employment Relations Amendment Act — at tradietools.nz/templates/
In Summary
The Employment Relations Amendment Act 2026 is a genuine improvement for trade businesses that use subbies — but only if your agreements are updated to reflect the new requirements. If your current contracts predate February 2026 or don't explicitly address the three key elements, you're not getting the protection the new law offers.
Review, update, get them signed, and keep copies. The legal certainty is worth the small upfront cost.
NZ Tradie Tools provides free calculators, templates and guides for New Zealand tradies. Visit tradietools.nz.