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An employment contract can be a difficult and complicated document at times, with confusing language. However, as an employer, it is important to get them right. In New Zealand, the terms set out in an individual employment agreement will bind both the employee and the business for the duration of the employee’s relationship. An employment contract or agreement can be amended at a later date to change some details. However, this can be complicated and there is no guarantee that the employee will accept any change at a later point. This article sets out the terms and details the law requires you to include in an employment agreement. It will also explore some other common clauses to consider including.

What Am I Required To Include By Law?

New Zealand law is quite clear on what requirements you must include in an individual employment agreement. Things you need to include are the:

  • names of the employer (likely you and/or your company) and the employee, to make clear who is bound by the agreement;
  • nature of the employment. If the contract is a fixed-term contract, this needs to be specified;
  • agreed hours or an indication of the hours that the employee will work; and
  • wage or salary that the employee will earn, and the means by which it will be paid.

You also are required to include:

  • a general description of the work that the employee will be performing;
  • an address or place of work;
  • a plain explanation of how to help resolve employment relationship problems, including advice that personal grievances must be raised within 90 days. This is mandatory for all employers to include and typically is covered by a page of standard information about the resolution of issues and information about personal grievances;
  • a statement that the employee will get time-and-a-half payment for working on a public holiday. If you are including an additional penal rate or are otherwise paying the employee more where they work on a public holiday, include the specific number; and
  • an employment protection provision that will explain what happens if your business is sold or transferred, or if the employee’s work is contracted out.

If you are opting for a specific arrangement like a trial period or probationary period, this must be included in the employment agreement. You cannot retroactively add it in at a later point.

Note that some entitlements (like four weeks of annual holiday leave) do not need to be in the employment agreement, but you must still provide them by law as an employer.

What Else Should I Include In My Employment Agreements?

There are a range of other things that businesses commonly include in employment agreements, even if the law does not require them to. These terms are often to give the business flexibility into the future. They are an important consideration when you are drafting an agreement. For instance, you could think about:

  1. what the required notice period should be for resignation and termination;
  2. whether the employee should be made to work on a public holiday if there is a need for this; and
  3. if there are extra leave or other entitlements you are offering to this employee.

Additionally, there are a range of other possible considerations depending on the:

  • nature of the work;
  • situation of your business; and
  • industry.

There is a reasonable amount of diversity in the different kinds of employment agreements used in New Zealand.

Key Takeaways

There are many things you must include in an employment contract, and also a range of terms that may be advantageous to include depending on your business’ situation. It is difficult to summarise all of the mandatory terms in an agreement, but they generally refer to the fundamentals of the relationship, the employee’s:

  • role;
  • pay; 
  • hours of work; and 
  • place of work.

There are other requirements for the benefit of the employee, such as an explanation of how to resolve employment relationship problems that may arise. Other possible terms, such as a trial period, are for the benefit of the employer. If you want to know more about drafting employment agreements, contact LegalVision’s New Zealand employment lawyers on 0800 005 570 or complete the form on this page.

Frequently Asked Questions

What happens if I do not include mandatory terms in an employment contract?

You risk the employment agreement being invalid, and your business may be penalised or prosecuted if the problem is large-scale. It does depend on the degree of the mistake, ranging from an honest error to an intentional omission.

Is it compulsory to put an employee’s hours of work?

Yes. You must specify at least the approximate hours that an employee is expected to work.

I want to dismiss an employee using a trial period but did not include one in their employment agreement. What do I do?

You cannot retroactively add a trial period into an employment agreement, so you will be unable to dismiss the employee on that basis. It is important to add these key terms into the agreement before it is offered to the employee.

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