Employment agreements

Employee agreements: The basics 

For any business to function smoothly, there needs to be a recruitment process where both the employer and the chosen new employee are clear about what’s expected. That’s where an employment agreement comes in, setting the expectations of the role. 

It’s also key to a good working relationship, as it should highlight any contractual obligations both the employer and new employee need to fulfill. It’s the first point of call in the event of a conflict. 

If you don’t have a written employment agreement… 

In New Zealand, if you do not provide your employees with an agreement, you may be liable to pay a fine of $1000 per employee. You may also be without legal standing in the case of a conflict. Forgoing an agreement is an expensive mistake to make.

Some important things to keep in mind 

• Although employment agreements have to be signed by the employer as well as the employee, they are still valid even if they are not signed. 
• Minimum employee rights are legal requirements, even if they are not present in an agreement. 
• An employment agreement cannot reduce minimum rights or trade them off for other benefits or rights. 
• The type of agreement you use depends on whether the employee is protected by a specific union agreement. 

Case study 

$33,000 was awarded to a New Zealand café worker due to the lack of a written employment contract 

The backstory

1. An individual was hired to work at a cafe. She was a friend of the café owner’s daughter-in-law.
2. The café worker worked 45-47 hours per week but the terms of her employment were never recorded in writing.
3. A disagreement took place between the owner and worker.
4. Following this disagreement, the café worker’s weekly hours were reduced to 25 hours as the business “wasn’t making money”.

The judgement 

The Employment Relations Authority (ERA) found that the reduction of hours amounted to a “fundamental breach of the agreement between the parties”. ERA said that the café owner had a “naïve understanding of the obligations an employer has towards an employee”, and awarded $20,000 in compensation and $13,036 in lost wages to the café worker. 

What you should include in individual employment agreements 

Not sure where to start? The Ministry of Business Innovation and Employment (MBIE) has named 10 points of information as the fundamentals of an employment agreement. Here’s what to include: 

• The names of the employer and the employee 
• A description of the job scope 
• The place of work 
• The agreed hours that the employee will work, including hours, days of the week, start and finish times 
• Whether the employment is for a fixed-term or ongoing 
• The wage/salary and how it will be paid 
• A plain explanation of how disputes concerning work will be resolved (this must include advice concerning personal grievances and how they must be raised within 90 days) 
• A statement that the employee will receive time-and-a-half payment (at least) for public holiday work
• An employment protection provision for relevant employees 
• Any other matters to be agreed on, including probationary arrangements, trial periods or availability provisions

Good luck! An employment agreement is the key to a harmonious and protected working relationship with your team. 

How Employment Hero helps you manage your team

Managing agreements, tracking hours and staying on top of legislative changes can be a heavy administrative load. Employment Hero is designed to simplify your HR and payroll processes so you can focus on your business.

Our Employment Operating System offers employment agreement templates for quick and easy customisation. You can create, send and store contracts digitally, creating a secure and accessible record. Our integrated payroll system makes it easy to manage pay-as-you-go holiday pay correctly, showing it as a separate line item on digital payslips. With everything in one place, you can more easily review work patterns and manage your obligations.

Find out more about Employment Hero and book a call with one of our team today.