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

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. Alternatively, they may rely on unreliable verbal agreements. Nevertheless, 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 in 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 without a written employment agreement. Furthermore, you must encourage and make the employee aware that they should seek independent advice prior to signing their employment agreement.

Furthermore, your business’ employment agreement 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 of resolving employment relationship problems; and
• the nature of the employment (fixed-term, casual or permanent).

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Protecting Your Business With Employment Agreements

While neither an employer nor an employee will enter an employment relationship expecting any issues, the reality is that disputes can arise. A typical example is when an employee is not completing their work to the standard you expect or is consistently late to work. 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 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 agreement 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. 

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 and processes for an employee are. You must provide your potential employees with an employment agreement to review ahead of their start date. This allows employees to seek guidance around the agreement and ensure terms, such as the 90-day trial period, are valid. It is much easier for employees to meet those expectations if they can explicitly see and check them. Furthermore, if they are not meeting their employment expectations, then it can provide clarity around performance management and misconduct. It also provides employees with information about their entitlements and their agreement 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 is 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 need help with your employment agreement, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.