Clear employment contracts are the foundation of a healthy working relationship between employers and employees.
Under the Employment Relations Act 2000, all employees must have a written employment agreement, whether they are permanent, fixed-term, or casual workers.
A well-crafted contract not only protects both parties, but prevents misunderstandings that could potentially lead to disputes. In this article, we’ll explore why clear employment contracts are essential, and what they should include.
Why Are Employment Contracts Important?
1. Legally Required
New Zealand law mandates that all employees must have a written employment agreement. Without one, employers risk penalties, and employees may face uncertainty about their rights and obligations.
2. Clarity on Terms and Conditions
A clear contract outlines essential terms like pay, hours, and job responsibilities. This prevents confusion, and ensures both parties understand what is expected from the start.
3. Protection for Both Parties
A well-defined agreement protects employers from claims of unfair treatment, and ensures employees are aware of their entitlements. If disputes arise, the contract serves as a reference point for resolving them.
4. Fair Process in Disciplinary or Redundancy Situations
Contracts often include clauses about performance management, disciplinary procedures, and redundancy. Clear guidelines ensure any action taken by the employer follows fair process principles.
5. Avoiding Costly Disputes
Misunderstandings about wages, leave entitlements, or termination conditions can lead to personal grievances. A clear contract reduces the risk of such disputes.
Key Elements of a Clear Employment Contract
A comprehensive employment agreement in New Zealand typically includes the following:
1. Names and Job Details: The full names of both parties, the job title, and a brief description of duties.
2. Type of Employment: Whether the role is permanent, fixed-term, or casual, including any conditions around the term.
3. Hours of Work: Expected hours per week, including start and finish times if applicable.
4. Wages and Pay Frequency: The rate of pay (hourly, salaried, or commission-based) and how often the employee will be paid.
5. Leave Entitlements: Annual leave, sick leave, public holidays, and any additional entitlements beyond the statutory minimum.
6. Notice Period: How much notice both parties must give if the employment relationship ends.
7. Trial Period (if applicable): If there’s a trial period, the contract must specify its length, terms, and notice periods.
8. Dispute Resolution: The process for resolving disagreements, including reference to mediation through Employment New Zealand if required.
9. Confidentiality and Intellectual Property (if applicable): Protecting sensitive business information, and clarifying ownership of work produced.
Example of a Clear Contract Structure
Employment Agreement Between: [Company name] and [Employee name]
1. Position & Duties
Job Title: Software Developer
Start Date: 1st April 2025
Location: 123 Business Street, Auckland (Hybrid work available)
Duties: Develop, test, and maintain software applications as directed by the employer.
2. Type of Employment
Permanent Full-Time (40 hours per week)
3. Remuneration
Base Salary: $60,000 per annum, paid fortnightly.
KiwiSaver: Employer contributes 3% to KiwiSaver (if applicable).
4. Hours of Work
Monday to Friday, 9:00 AM – 5:30 PM (including a 30-minute unpaid lunch break).
Reasonable additional hours may be required.
5. Holidays & Leave
Four weeks of paid annual leave per year.
Public holidays as per the Holidays Act 2003.
Sick leave: 10 days per year.
Parental leave as per NZ law.
6. Trial Period
90 days from the start date.
Either party may terminate employment with one week’s notice during this period.
7. Termination & Notice Period
After the probation period, either party must provide 4 weeks’ written notice.
Instant dismissal for serious misconduct as per company policy.
8. Confidentiality & Intellectual Property
Employee must not disclose confidential information during or after employment.
Any work created by the employee as part of their job is the property of the employer.
9. Dispute Resolution
If a dispute arises, both parties will attempt to resolve it internally.
If unresolved, mediation services will be used.
10. Health & Safety
The employee must follow all workplace health and safety policies.
11. Other Terms
Any additional policies in the Employee Handbook apply.
Changes to the contract must be agreed upon in writing.
12. Signatures
Both parties agree to the terms set out in this contract.
Elements that Lack Clarity
1. Vague Terms: Contracts that use unclear language can lead to different interpretations and disputes.
2. Missing Clauses: Failing to include essential terms, such as notice periods or redundancy conditions, leaves both parties vulnerable.
3. Misclassification of Employment: Treating employees as independent contractors or casual employees without proper justification can result in legal penalties.
4. Failure to Update: Employment terms can change over time, so contracts should be reviewed and updated as roles and laws evolve.
What if you don’t have a Written Agreement?
If an employee is working without a written agreement, they are still entitled to the minimum rights under New Zealand employment law, including fair pay, leave entitlements, and protection from unjustified dismissal.
However, it’s best to formalise the arrangement in writing as soon as possible.
Employees can ask their employer for a written agreement, while employers should ensure that all workers have a signed contract in place.
Conclusion
Clear employment contracts are more than just paperwork.
They are essential tools for building trust and maintaining fair, lawful working relationships. Both employers and employees benefit from understanding their rights, responsibilities, and expectations from the get-go.
Mahi Law can Help!
Our expert team will help you understand your employment rights, and pursue resolution (including compensation) through various channels, such as: Without prejudice negotiations, mediation, the Employment Relations Authority, or Employment Court if required.
We also work on a no-win, no-fee basis – if we win your case, your employer covers the costs.
Get in touch for a free consultation! You can fill out this form – or contact us at [email protected], or 027 425 2231.
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