Importance of Employment Agreements for Your NZ Business

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Table of Contents

• The Legal Requirement to Have Employment Agreements
• Protecting Your Business With Employment Agreements
• Avoiding Ambiguity and Maximising Clarity
• Key Takeaways
• FAQs

Employment agreements are of vital importance to all New Zealand businesses. Not only are they legally required, but they help to protect your business from employee disputes. Likewise, they minimise ambiguity and help maintain clear, productive relationships with your staff. Many small businesses in New Zealand lack employment agreements for their workers or rely on untrustworthy verbal agreements. It is in all business’ interests to maximise clarity.

This article will set out why employment agreements should be a top priority for your business. This includes the legal requirement to have them and how they protect your business into the future. 

The Legal Requirement to Have Employment Agreements

Every employee in your business must have a written employment agreement. Likewise, you must provide your employees with a copy of this agreement. It is a legal requirement for these agreements to be written down, not just verbal! Your business risks being fined $1,000 for each employee who does not have a written employment agreement. 

There are additional requirements about the information that must be in employment agreements. For instance, your business’ employment agreements must include:

• the name of your business and the employee;
• a description of the work the employee will be performing;
• the employee’s place of work (such as an office location);
• set hours of work (including the number of hours, an indication of start and finish times and the days of the week the employee will work);
• the agreed wage or salary and how you will pay it;
• the process to resolve employment relationship problems; and
• the nature of the employment (fixed-term, casual or permanent).

Protecting Your Business With Employment Agreements

While neither an employer nor an employee will enter an employment relationship expecting any problems, the reality is that disputes can arise. A typical example is when an employee is not completing their work to a standard you expect or is consistently late. In these circumstances, it is beneficial for your business to reference an employment agreement that clearly states what the employee’s work is and the hours they must to work. The agreement should also set out a clear procedure in the event of a breach of those terms. 

Additionally, these terms will act as a point of reference and support if there are disagreements over an employee’s performance or behaviour. If the issues continue and there is a formal claim raised against your business or the employee, it becomes even more critical to have a clear, written employment agreement. A poorly drafted or generic contract may not be strong enough to hold up in the Employment Relations Authority or the Employment Court.

There are other ways to use an employment agreement to protect your business. You can include a trial period or probationary period to give your business more flexibility with new hires. Other possible terms include a restraint of trade or confidentiality provisions to protect your business’s valuable IP. It can help get an employment lawyer’s assistance when drafting your business’s employment agreements.

Avoiding Ambiguity and Maximising Clarity

Employment agreements are essential tools for employees as well, not just employers. This is because a well-written contract will minimise any ambiguity, and make it clear what the expectations on an employee are. It is much easier for employees to meet those expectations if they can explicitly see (and check) what those are. It also provides employees with information about their entitlements and their contract details. 

Many disputes between employers and employees come from ambiguity over expectations, as opposed to any malicious intent or bad blood. A good employment agreement can help minimise that ambiguity and hopefully avoid disputes before they arise. 

Key Takeaways

The importance of employment agreements for your business are immense. The first reason is that they are a legal requirement: you must have written employment agreements for all of your staff. There are also specific terms you must include in those agreements. However, there are deeper reasons why employment agreements are helpful to employers. They allow you to protect your business by making expectations clear, avoiding ambiguity, and specifying additional terms that you can tailor to your business. You cannot rely on special terms unless they are clearly written in an employee’s agreement. 

If you have any questions about employment agreements, contact LegalVision’s New Zealand employment lawyers on 0800 005 570 or complete the form on this page.

FAQs