Individual Employment Agreements – Let’s get down to Business.

Advertising a vacancy and interviewing potential candidates is a huge undertaking for most businesses. It soaks up time and resources that could be better spent elsewhere, especially if you’re in a competitive market. Taking the time to screen potential candidates to see if they have “what it takes,” (i.e the right set of skills and competencies) to do the job is very important and should not be overlooked as this forms the backdrop to your good faith interactions (for both parties).

In most cases, choosing the right candidate and making the offer of employment works out favourably for both parties but in some instances, the fit is misaligned from the start. It’s like trying to push a square peg into round hole. The harder you try to push, the more resistance you encounter, leaving both parties confused and disillusioned.

The focus of this paper, is not about the HR process, it’s about what needs to go into an individual employment agreement. This is an area which is sometime neglected but if you get the basics right from the outset you could save yourself a lot of problems further down the
track.

We’ll walk you through the essential terms and conditions that can make life easier for you and your new employee. The first question we need to determine is what type of employment is being offered. Will the new employee be permanent, fixed term, casual or seasonal (i.e a variation on the fixed term employee scenario).

Now, let’s look at each of these types of employment as they relate to the Employment Relations Act 2000 (“the Act”) because it’s important that you understand the differences:

A) Permanent employees
This can encompass either full or part-time scenarios. Both are entitled to a full set of rights and privileges which include sick leave, parental leave, bereavement leave and annual leave to name a few.

B) Fixed term employees
This type of employment is typically used in a situation where an existing employee is on maternity leave (for example) and the employer needs to find a replacement to cover her absence. These employees have the same rights and privileges as permanent employees. The only difference being that their employment will terminate on a fixed date in time when the existing employee finally returns to work.

C) Casual employees
This type of employment is not defined in the Act and is used in situations where the employer cannot guarantee the hours of work due to changes in business patterns (i.e peak business or a winter period slow down). Putting it simply, the employee works on an ad hoc basis with no ongoing expectation of employment. Nevertheless, these employees are still entitled to the same rights and privileges as permanent and fixed term employees but their entitlements are dealt with in a slightly different manner. 

Before the new employee commences work, you should have already had a full and frank discussion about the terms and conditions of employment and also provided them with a copy of the agreement. This is done to ensure that everyone is on the same page and that the
principle of “good faith” is being observed at every junction.

Again, it is essential that the terms of the employment agreement match the type of work that is contemplated between the parties. The nature of the work, workplace, hours of work, reporting structures and competencies need to be recorded accurately.

Under the Act, employment agreements must include the following clauses:

1. The full names of the parties.

2. An accurate description of the work that will be performed by the employee (i.e a succinct description will clearly outline what your expectations are to the employee and eliminate any misunderstanding).

3. The location(s) of where the employee will be expected to work.

4. The agreed hours or an indication of the hours that the employee will work (this should include the exact number of hours he or she will work; start and finish times and the days of the week the employee will work).

5. The hourly rate or salary (i.e this must meet the rate under the Minimum Wage Act 1983) and state the frequency of payments and how it will be paid (i.e tender).

6. How employees will be remunerated if they work on public holidays (i.e at a bare minimum this will need to be time-and-a-half).

7. Sick leave, bereavement leave and annual leave entitlements (implied under the Act).

8. A provision that the employee will be subject to a trial period, probationary period and or availability.

9. How your business deals with and resolves employment relation disputes.

10. A simple and clear explanation as to how your business will deal with employment protection in the event that your business is sold.

Clearly the above does not take into account every employment scenario as each is unique and specific to its own set of circumstances. Nor does it discuss in any detail the legal requirements of a contract for service (i.e an independent contractor). We suggest that if you are unsure about what to do or how to draft an employment agreement that you consult with a professional straight away. The old adage, “one size fits all” couldn’t be further from the truth. Sometimes the cost of doing something right the first time around outweighs the risk of winding up in court.

If you need any guidance on this process, please feel free to contact us.