Creating an employment agreement

Creating an employment agreement

Employment agreements, often called ‘contracts’, contain all the details about employee rights and what will be paid for doing the job. Before agreeing to take on a job, the employee should read the employment agreement, ask questions about anything they do not understand and get professional advice if they want to.  

The employee can agree with you if they want to try to get better terms and conditions in your employment agreement. Both you and your employee will need to act in good faith towards each other when negotiating. If the employee is a union member, the union negotiates the terms of the contract on their behalf. 

Collective and individual employment agreements

Even if not listed in the employment agreement, the employee must still be given the minimum employment rights set by the law. These include their right to at least the minimum wage, and 4 weeks of annual holidays a year (once the employee has worked there for 12 months), for example. 

Employee rights and responsibilities

As an employer, any employment agreement with your employee must include any terms and conditions agreed upon and must not contain anything:

• contrary to law, or
• inconsistent with the Employment Relations Act 2000.

Give an employment agreement to each employee

Every employee must have a written employment agreement. You can agree an individual employment agreement with them, or if they’re a union member they’ll be covered by any relevant collective agreement. 

If you do not give an employee a written employment agreement, you can face an infringement fee of $1,000. Additionally, the Employment Relations Authority can order penalties of up to $10,000 for an individual employer and up to $20,000 for a corporate body. 

 You must also: 

• keep a copy of the employment agreement (or the current signed terms and conditions of employment)
• keep an 'intended agreement' even if the employee has not signed it
• give a copy of their agreement to an employee if they ask for it
• ensure the employment agreement covers everything that legally needs to be covered.

Record-keeping

Minimum rights (such as the minimum wage and annual holidays) are legal requirements and apply even if they’re not written in the employment agreement. The employment agreement you offer an employee cannot reduce these or trade them off for other things. 

Negotiating and offering as an employer 

Rights and responsibilities

What an employment agreement must include

An individual employment agreement must include:

• the names of the employer and the employee (to make clear who are the parties to the agreement)
• a description of the work to be performed (to make clear what the employee is expected to do)
• an indication of the place of work
• the agreed hours or an indication of the hours that the employee will work, including any or all of the:
  • number of hours
  • start and finish times
  • days of the week the employee will work

Hours and breaks

• the wage rate or salary payable (this must be at least the relevant minimum wage) and how it will be paid; if you will not be paying the employee in cash, you should write how they will be paid in the employment agreement

Types of pay

• a clear and plain explanation of how to try and resolve employment relationship problems, including:
  • a statement that most personal grievances must be raised within 90 days, and
  • a statement that sexual harassment personal grievances must be raised within 12 months

Problems in the workplace

• a statement that the employee will get (at least) time-and-a-half payment for working on a public holiday

Public holiday pay

• for relevant employees, an employment protection provision to apply if your business is sold or transferred, or if the employee’s work is contracted out

Workplace change process

• any other matters you and the employee have agreed on, such as trial periods, probationary arrangements, or availability provisions 

Trial and probationary period

• if the employee is a fixed-term employee, this must be recorded in the employment agreement along with a genuine reason why it is a fixed term. 

Types of worker

The employment agreement builder can help you ensure you cover everything you need to. 

Employment agreement builder – business.govt.nz (external link)

Other things you can include

An employment agreement can contain any other terms and conditions that you and the employee agree to, for example: 

• the notice period required for resignation and termination 
• timing of rest and meal breaks
• restraint of trade clause
• a trial or probationary period provision 
• an annual closedown. 

Restraint of trade

Some things (like 4 weeks’ annual holidays) do not need to be in the employment agreement, but you must still provide them by law. If you agree to better terms and conditions than the minimum rights, you should record these in the employment agreement. 

 You can base an individual agreement on: 

• a current collective agreement if there is no intent or effect to undermine collective bargaining or the union agrees 

Collective agreements

• other individual employment agreements in the workplace. 

Employees on individual employment agreements do not have to have the same terms and conditions even if they do the same job in the same workplace. But you need to make sure you are not discriminating on any unlawful grounds.