The importance of getting employment agreements right

July 7, 2023




In New Zealand, every employee must have a written employment agreement. They contain the fundamental terms and conditions of the employment relationship. A copy should be provided to the employee and you, as employer should also keep a copy.

So, what are these fundamental terms and conditions that the employment agreement should cover - what needs to be in them and how you can protect yourself and your staff?

Agreements must be in writing

First, the agreement must be in writing.  Why?  Well, it provides an employer with the opportunity to clearly communicate their expectations to an employee. It also sets out the job description (an integral part of the agreement) which provides the first step in effective performance management.

The need for a written employment agreement applies to all staff, from permanent full-time through to casual. Independent contractors such as agricultural contractors are not covered by this Act although we still recommend that you have written agreements with them also.

So, what must a written individual employment agreement contain?  The following are essential terms that must be included:

  • The names of the employer and employee.
  • A description of the work your employee will do.
  • An indication of the place of work (location).
  • The agreed hours or an indication of the hours of work.
  • The wages or salary the employee is to be paid.
  • Requirement to pay at least time and a half if they work on a public holiday, and a day off in lieu.
  • An explanation in plain English of what services are available to resolve employment relationship problems including advice that personal grievances must be raised within 90 days.

Other Conditions

All employees are entitled to the minimum wage – regardless of whether you employ them full-time, part-time or casual. It is important that you know the current minimum wage rates at all times to ensure you are paying at or above the minimum for actual hours worked. The minimum wage is set annually and must be paid for each hour worked, for example, if you own a farm, wages cannot be averaged over a season.

If you and the employee agree to a ‘trial’ period, this has to be included in the employment agreement.

All employees are entitled to at least four (4) weeks of paid annual leave (after working for you for a year).  Please note that you cannot ‘contract out’ of these rights.  You can provide more leave for employees than this but you cannot provide less!

In many circumstances, you, as the employer, may also be providing accommodation for your staff.  Remember that if you are paying the employee the minimum wage then the most that can be deducted for rent is up to 15% for board and 5% for lodging.

Creating a standardised agreement

Some organisations, such as Federated Farmers, provide a variety of employment agreements which can be bought online. These are updated regularly and contain all the essential terms you need in the contract.  However, these are standardised agreements and you may require something more bespoke.  If so, then we can help you draft an agreement that meets your specific industry/job needs.

Keep accurate records

It is really important that you, as employer, keep accurate records of hours worked, wages payable (and paid), and leave taken for each employee.  You are legally required to keep these records for six years, so make sure you have a really good recordkeeping system in place.

Ending employment

We all spend time thinking about the start of a job but often we give little consideration to what happens when the employment relationship ends.  There are a number of reasons for employment to end, which should also be considered when preparing an employment agreement, including:

  • Resignation – all employees can choose to resign but they must give you notice as stated in their employment agreement. You should ask for their resignation to be given to you in writing.  You can confirm you accept it verbally but it’s always good to follow this up in writing.
  • Non-performance – you can end an employment relationship due to non-performance or misconduct by the employee.  There are a number of commonly accepted grounds including failure to carry out their tasks, misconduct, abandoning the job (i.e., not turning up for work for a number of days without advising you).
  • Redundancy – you may find that a position becomes surplus to your business needs, leaving an employee without a position. If you are considering making an employee redundant, it must be the position that is surplus to your business needs, not the person! Positions may become redundant in situations including the sale of your business, financial difficulties (although this needs to be clearly proven), or the end of a specific contract.  But remember, you cannot terminate an employment agreement just because a project has finished or the busy times are over. If you only require staff for a short period of time, then you should employ them on a fixed term agreement.

Specialised advice

For you, as the employer, there may be other issues that are relevant or essential to you and your employees that are not covered in a standard agreement.  We have specialised knowledge and expertise in all aspects of employment law and can work with you to ensure your employment agreements meet all your needs and all legal requirements.  Let us know how we can help you.