Employment agreements

What to include in an employment agreement

By law, all employees must have a written individual employment agreement that sets out the basic terms and conditions of employment. As an employer you are responsible for arranging the agreement and may face a fine if you fail to provide one in writing.

The agreement should be signed by the employer and employee before employment begins. However, an agreement can still be valid even if it is not signed.

Take a look here for the things that must be included in a written employment agreement.

If you do not have a written employment agreement with your employees, they are still entitled to all legal minimums and protections. In a dispute, assumptions about common practices in the sector will be made. This could result in a significantly greater cost to you as an employer than anticipated, e.g. remuneration based on median wage rather than minimum wage.

If an employee does not have an employment agreement, they can ask you for one and you must provide one by law.

Employees can seek advice and support on employment matters from Rural Support Trust.

Where to get an employment agreement

Some businesses write their own employment agreements using the employment agreement builder supplied by Business NZ. Most dairy farmers get templates tailored to their farm jobs from one of the following sources:

• Federated Farmers
• Rural Professionals – including lawyers, accountants and farm consultants.

Types of employment agreement

Permanent employment agreements are when employees are considered to have ongoing work with no specified end date. This work can be either full or part-time.

Fixed term employment agreements have an end date. They may be offered to someone if there is a genuine reason the work only covers a set period. Examples include at the end of a project, or when another employee returns from parental leave. The employment agreement should clearly state the reason for the fixed term, when the fixed term employment will end, and why. The employee and employer should agree to this in writing before work begins and the employee should not expect the job to continue after the end date.

Casual employment agreements mean the employee should have no expectation of regular work or pattern of work hours. Work hours will only be offered by the employer on an as-needed basis. A true casual employee should have the option to say ‘yes’ or ‘no’ to the work, based on their availability. The Employment New Zealand website has more information on types of employee.

Number of hours to work

New Zealand employment law does not have a legal limit to the number of hours an employee can work per week. The only provision is that, it is agreed in good faith between the employer and employee and no adverse consequences are likely regarding their health and safety or the safety of others.

However, there is growing global concern about worker exploitation. We anticipate growing pressure for dairy supply companies to demonstrate to their customers that human rights are adhered to through the supply chain. Part of this is likely to be a focus on hours worked per week. An example of this is Fonterra’s Modern Slavery Statement issued in 2022.

Global standards almost all specify that regular hours should not exceed 48 hours per week. Also that additional hours (up to a maximum of 60) must be agreed by the employee.

It is a requirement in New Zealand that accurate records of hours worked for all employees are maintained. This also assists with managing risk and increasing productivity.

Trial periods

A 90-day trial period may be included in the employment agreement for new employees who have never worked for that employer, even casually. The trial period allows for the employee to be dismissed during the trial period, the employer must provide notice and the employee may not raise a personal grievance except for discrimination.

The trial period must be agreed upon before the employee starts work. It is agreed by the employer and employee in good faith and is recorded in an employment agreement which is signed before the employee commences work. This is critical for the trial period to be valid. The Employment Court has found that if signing took place even 5 minutes after starting work, the trial period does not apply.

The Employment New Zealand website has more information about trial periods.

Signing the agreement

The employer must allow the employee time to consider the employment agreement before signing it. This includes ensuring the employee has time to seek advice from somebody independent about what’s in the agreement.

Make sure both the employer and employee sign the agreement and that you both have copies of it.

End of employment

Employment can end in lots of ways. Ideally, an employer and employee will part company amicably and professionally.

Resignation

An employee can resign at any time by notifying the employer that they will be leaving and giving the correct notice period as documented in their employment agreement. Employment New Zealand has all the information on the process to follow after receiving an employee’s resignation.

Dismissal

This is when an employer chooses to end the employment due to misconduct or performance issues.

Abandonment of employment

This is when an employee fails to turn up for work for an extended period without having authorised leave or notifying the employer of sickness.

You cannot automatically dismiss an employee after an unauthorised absence. You must conduct a full and fair investigation before determining that an employee has abandoned their employment. You must also make reasonable efforts to contact the employee and determine why they are absent. Listen with an open mind. Carefully consider their explanation and any other relevant information (e.g. medical certificates or conversations had with family members) before deciding whether they have in fact abandoned employment.

An employee who has abandoned their job is entitled to the same payments they would have received had they resigned normally and given notice.

For full details on what to do if you believe an employee has abandoned their employment, refer to the Employment New Zealand website.

Restructure of your business

Restructures are required from time to time. As a result, some positions may become redundant. There are standard rules that apply to all workplace change processes:

• There must be a genuine business reason to make change – this cannot be used to manage individual employee performance issues.
• Employers must consult with employees in a fair and reasonable way. This includes giving employees reasonable time to respond to proposed changes and genuinely considering their feedback.

Please refer to the Employment New Zealand website for the full details of the workplace change process.

Managing the end of employment

When managing the ending of employment, it is essential to remember to act in good faith and always follow a fair process.

• Review the employment agreement to ensure you understand the terms and conditions you are operating under. This will confirm the notice period required under different situations, and what your employee is entitled to. It will also confirm what, if any, deductions you can make for outstanding monies or work not completed.
• Agree with your employee the date they will stop working on your farm.
• Ensure employees receive the correct entitlements in their final pay, including any annual leave owing.
• Carry out exit interviews with departing staff. Ask for feedback on your strengths and weaknesses as an employer. You may get some great insights that will help keep future employees.

Calculating final payments

In general, the final pay should include:

• The employee’s normal wages, or salary, for any time worked since the last pay day.
• Any outstanding holiday pay.
• Payment for any alternative holidays.
• In some cases, payment for upcoming public holidays.

The final pay should be paid no later than the next regular payday. If you wish, you can pay the final pay earlier than this. For example, on the employee’s last day. Read full details on how to calculate entitlements on termination or resignation.

Deductions: Generally, an employer cannot make deductions from an employee’s wages unless the employee has requested, or agreed to it, in writing. You may be able to deduct certain items from an employee’s final pay if the deduction is provided for in the employment agreement, and it is fair and reasonable to make the deduction, given the circumstances.

Before making any deduction, review this guide to wage deductions. Remember that the deduction needs to be fair and reasonable.