Employment Agreements
A guide to employment agreements in New Zealand
An employment agreement is the foundation of any working relationship in New Zealand. Whether you are an employer bringing someone new into your business or an employee starting a new job, this document sets out the rules and expectations for everyone involved.
By law, every employee must have a written employment agreement. This protects both parties by ensuring everyone knows what they are agreeing to before work begins.
What legally needs to be in an agreement
The law requires certain basic details to be included in every employment contract. These mandatory clauses form the core of the agreement.
Names of the parties: The legal name of the employer and the employee.
Position and duties: A clear description of the work the employee will be doing.
Place of work: The physical location where the employee will carry out their duties.
Working hours: A clear indication of the arrangements relating to the times the employee is to work or
the total hours of work.
Payment details: The wage or salary agreed upon, which must meet or exceed the relevant legal minimum wage.
Public holidays: An explanation of how the employee will be paid for working on a public holiday.
Resolving problems: A plain English explanation of the services available for resolving employment relationship problems, including a statement that any personal grievance must be raised within 90 days.
Type of employment: The contract must state whether the role is permanent, casual, or for a fixed term. If it is a fixed term agreement, there must be a genuine reason for it and the document must state exactly when or how the employment will end.
Extra clauses employers can add
Employers often add extra clauses to protect their business and clarify company policies. These additions must be fair and agreed upon by both parties before the contract is signed.
Restraint of trade: This clause tries to stop an employee from working for a direct competitor or starting a similar business for a set time after they leave the job. It is only legally enforceable if it is considered reasonable and strictly necessary to protect the legitimate business interests of the employer.
Non solicitation: This is a specific type of restraint. It prevents a former employee from poaching the clients, suppliers, or other staff members of their former employer for a certain period after they leave.
Shutdown periods: Employers can include a clause allowing them to close the business for a specific time, such as over the Christmas and New Year period. When this is in the agreement, employees may be required to take their paid annual leave during this closure.
Drug and alcohol testing: An employer can only require an employee to undergo drug testing if it is clearly written into their employment agreement. This is highly common and legally acceptable in safety sensitive environments like construction, transport, or heavy manufacturing.
Trial periods: Employers can include a trial period of up to 90 days for new employees. During this time, an employer can dismiss the employee without the employee being able to raise a personal grievance for unjustified dismissal. The employee must sign the contract containing this clause before their very first day of work for it to be legal.
Confidentiality: This requires the employee to keep private business information secret, both during their employment and after they have left the company.
Notice periods: This sets out exactly how much warning either party must give if they want to end the employment relationship.
Deductions from pay: An employer cannot legally take money out of an employee's pay without their written consent. A general deductions clause allows the employer to recover overpayments or costs for unreturned company equipment when the employee leaves.
A clear and well written employment agreement is the best way to prevent misunderstandings. It ensures both the employer and the employee understand their rights and responsibilities from day one. If either party is unsure about any part of a contract, it is always a sensible idea to seek independent advice before signing.
Comments