Skip to main content Skip to page navigation

In association with

Alternatives to hiring an employee

If your business needs extra help, but you’re not entirely sure you have the budget or enough work to justify hiring a permanent employee, you could consider getting a contractor or unpaid intern/volunteer.

Deciding what type of help to get, however, should depend on a number of factors, including your requirements, investment level and budget. Read on to learn more.

The difference between employees and contractors

Many small businesses think that employees and contractors are the same. They’re not, and it’s important to understand how they are distinct because you have different obligations to them and they need to be treated differently.

The main difference between an employee and a contractor is that employees work for you. On the other hand, contractors work for themselves.

This table explains some of the more obvious ways to work out who is an employee and who is a contractor.

EmployeesContractors
Work for you directly and can be told what to do, when to do it, and how to do it. Decide when and how they do the work and can employ other people to help them finish it.
Work a set number of hours per week or month, and get paid overtime when they work extra hours. Are responsible for getting the work done to the required standard in the agreed time frame.
Work where you tell them to, using equipment you provide. Generally own — and take care of — their own assets and equipment.
Have an employment agreement with you. Run their own business, advertise their services and are free to work for other people.
Require employers to pay their PAYE and KiwiSaver for them. Pay their own income tax, KiwiSaver and ACC levies.

Find out what you know about hiring and managing people.

Hiring a contractor can seem like an appealing option for many businesses because there are no long-term commitments. However, contractors aren't suitable for every role and you need to carefully consider what they will – or won’t – do for your business’s growth.

In general, hiring a contractor might be a good idea if you:

  • require a specific skill that is otherwise unavailable
  • know you’re only going to need this kind of help for a finite period
  • are not trying to build a permanent team with their skills.

This table outlines some of the advantages of using a contractor, as well as other things you should be thinking about:

AdvantagesConsiderations
You don’t have to commit to providing an ongoing salary or benefits. Contractors may complete work somewhere other than your place of business. This means you’ll need to trust that they’ll get the job done to the required standard and deliver on time.
You can hire them when you need them. They might have other work commitments and might not be available when you need them.
They’re responsible for their own permits and licenses. You mightn’t get the same sense of loyalty out of them as a full-time employee.
They’re experienced and require little training, if any. Written agreements with contractors have to be carefully considered. For example, you may need clarifications around copyright ownership or legal liabilities.
casestudy KeepingContractorsSafe

Case study

Keeping contractors safe

Judy owns a graphic design business and has a fixed-term contract to refresh a bank's website. She mainly works from home, but sometimes uses the bank’s head office.

As a contractor, Judy is unsure who's responsible for her health and safety. The bank's administrator tells her they have to take practical steps to ensure a safe work environment. This includes training in what to do in an emergency and making sure loose cables are out of the way.

Note: What an employer needs to do to ensure workplace safety depends on the type of work involved. If Judy worked on a fishing vessel, for example, the employer would have to do much more.

Unpaid interns and volunteers

If you have a specific job to do that could help an inexperienced person gain new skills and improve their employment prospects, you might be able to hire an unpaid intern or volunteer. Offering an internship or volunteer position isn’t just a way to get free help — you need to be sure that the person doing the work will benefit from it, even if they’re not being paid. 

Typically, unpaid internships and volunteer positions are best suited to businesses that:

  • have specific jobs to do that will give someone new skills or opportunities they wouldn’t otherwise get
  • offer services that give back to the community.

This table outlines some of the advantages of using an unpaid intern/volunteer, as well as other things you should be thinking about:

AdvantagesDisadvantages
They often have a lot of passion and can bring fresh ideas to the business. They need to be kept safe and given the same health and safety training or equipment as any other staff member.
They can free up your time, or the time of other staff. Training them can take more time than you initially planned for.
They can be good sounding boards for new ideas, products or services. A volunteer can leave at any time.
They often have rich and diverse experiences. You can’t pay them, but you can give them a koha or gratuity. Make sure they clearly know this is not payment.
They can be grateful and appreciative of learning new skills. Unpaid internship positions can only last for a maximum of 12 months.

Best practice when taking on an unpaid intern/volunteer is to:

  • Detail how the internship will work in writing, so there are no misunderstandings.
  • Be explicit that the position will not lead to work.
  • Keep a record of how long the internship/volunteer position lasts.
  • If appropriate, give them a reference once the position ends.

There are many organisations that specialise in matching businesses with unpaid interns/volunteers. Many of them are free and they try to make a good fit between both parties, so they’re worth contacting. Search online to find one in your area.

How helpful was this information?