The government is proposing options that could see more contractors being given employee rights.
In a discussion document released by the Ministry of Business, Innovation and Employment (MBIE) it says some workers are being misclassified as independent contractors, meaning they miss out on employee rights such as paid annual and sick leave.
Workplace Relations and Safety Minister Iain Lees-Galloway said the government was consulting on changes to improve contractors' rights.
"While contracting works well for many people, we are hearing increasing reports about vulnerable workers in contracting situations where they are working long hours, earning less than the minimum wage per hour, are dependent on one business for all their income, or have no power to negotiate better arrangements," he said.
To crack down on those who are misclassifying their employees' proactive targeting by labour, inspectors could be increased to detect non-compliance, or inspectors could be given the ability to decide a workers' employment status.
Penalties could also be introduced for misrepresenting an employment relationship as a contracting arrangement, by amending the Employment Relations Act.
Another option in the document is to legally define those who work in certain occupations as employees.
However, there could also be opt-outs for workers who are genuinely self-employed and operating as independent businesses.
There is also a proposal to change the tests used by courts to determine employment status, to include vulnerable contractors.
For example, tests could be introduced to take into account the degree of economic dependence between a worker and a particular firm, the bargaining power imbalance, or how risk is passed from a firm to a worker.
Among those who remain contractors, some could be given the right to bargain collectively about their terms and conditions of employment.
Submissions on the document close on 14 February.