What should I include in an employment agreement when hiring?
Hiring someone new is a big step. You want them to understand the job, settle in well and know what you expect.
A clear employment agreement helps make that happen. It records what you have agreed and gives you both something to refer to if questions arise. But what must go in the contract? What else is worth including? And how much detail belongs in a workplace policy?
Here is a practical guide for New Zealand employers on what needs to be included in an individual employment agreement.
Every employee must have a written employment agreement, including part-time and casual employees. If a collective agreement covers the role, check your obligations before offering individual terms.
Choose an agreement that matches how the person will actually work. Calling someone ‘casual’ does not make them casual if their working arrangement is regular and ongoing.
Use the correct employer name. If a company employs the person, identify that company rather than just its trading name.
What legally needs to be included in an employment agreement?
The Employment Relations Act 2000 sets out key requirements for individual agreements. Other legislation, including the Holidays Act 2003, adds obligations. Your agreement must cover:
Who the parties are: the employer’s and employee’s names.
The work: a description of what the employee will do.
The workplace: an indication of where they will work.
Hours: the agreed hours, or an indication of them, including relevant days, times or number of hours.
Pay: the wage rate or salary and payment arrangements.
Public holidays: a provision for at least time and a half for working on a public holiday.
Resolving problems: a plain explanation of available help, including the usual 90-day personal grievance deadline and the 12-month deadline for sexual harassment grievances.
Employee protection: for relevant employees, provisions addressing a sale, transfer or contracting out of work.
Other agreed terms: including any applicable fixed-term, trial, probation or availability arrangements.
A general statement that ‘employment law applies’ does not replace required clauses.
Some arrangements need extra wording:
Fixed-term employment
A fixed term needs a genuine reason based on reasonable grounds. The agreement must explain how employment will end and why it will end that way. For example, you might employ someone to cover parental leave. Record the actual reason and the event or date that ends the employment. Do not use a fixed term simply to test whether someone suits the job.
Trial or probationary periods
If you want a trial period, the clause must meet strict legal requirements. It must start at the beginning of employment, last no more than 90 calendar days and contain the required wording. The employee must not have worked for you before. They must agree to the trial and sign the agreement before starting work. Trial periods are not permitted for employees on an Accredited Employer Work Visa.
Probation is different and does not provide the same protection against an unjustified dismissal claim. Get advice about which arrangement is suitable.
Availability and cancelled shifts
If employees must remain available beyond guaranteed hours, a valid availability provision needs guaranteed hours, genuine business reasons and reasonable compensation for availability.
If you may cancel shifts, include a reasonable notice period and reasonable compensation for cancellation without that notice. Missing or invalid wording can mean paying for the cancelled shift anyway. A rostering policy alone will not meet these requirements.
What else should I include in my employment agreements?
The legal minimum is a starting point. A useful agreement also answers the practical questions that commonly cause disagreements.
Start date and employment type
Record when employment begins and whether it is permanent, fixed-term or casual, and full-time or part-time.
Clear pay arrangements
Explain the pay cycle, overtime arrangements, allowances and any commission or bonus. If you promise a pay review, clarify whether this means a review only or a guaranteed increase. Avoid wording that promises more than you intent. Be clear about KiwiSaver treatment and check that it is lawful.
Working arrangements
Explain guaranteed hours, how rosters are set, expectations around extra hours and any agreed flexibility.
For hybrid roles, record the agreed arrangement and where the employee is normally based. Avoid relying on a vague promise that they can 'work from home sometimes'.
Leave and breaks
Employees have minimum rights even if these are not written into the agreement. However, a clear summary helps everyone understand the arrangement.
Record any extra leave you promise. Explain relevant public holiday expectations and any annual closedown, while making sure the wording meets legal requirements.
You must also inform employees about their Holidays Act entitlements and where to get more information. NOTE NEW LEGISLATION
Notice and ending employment
Include notice periods and relevant arrangements for returning property and completing a handover.
Make any agreed redundancy compensation clear. A notice clause does not, by itself, allow an employer to dismiss someone without meeting applicable legal requirements.
Protecting your business
Depending on the role, consider confidentiality, ownership of work created during employment, conflicts of interest and company equipment. Get advice before adding restraints of trade, restrictions on second jobs, deductions or training repayment clauses. These need careful wording and must be lawful and reasonable.
Keep the contract relevant. A junior employee should not receive a bundle of restrictive clauses copied from a senior management agreement.
What belongs in the Employment agreement and what should be in a workplace policy?
A helpful approach is to put the agreed employment terms in the agreement and day-to-day processes in policies.
For example, the agreement should record an employee’s extra week of annual leave. The leave policy can explain how to submit a request.
Put in the agreement or an expressly incorporated schedule | Usually put in a policy or procedure |
Pay, guaranteed allowances and agreed benefits | Expense claims and approval steps |
Agreed hours and individual flexibility | Rostering administration |
Extra leave entitlements | Leave request process |
Main duties and workplace | Detailed work instructions |
Notice and agreed redundancy compensation | Handover checklist |
Confidentiality obligations | IT security and password rules |
Health and safety, bullying complaints, dress standards, vehicle use and social media rules often suit policies. These documents explain expectations across the workplace without making every procedure part of each employee’s contract.
Be clear about how documents fit together. A job description can sit in an attached schedule. Clearly identify it and say whether it forms part of the agreement. Make sure the employee receives it before agreeing.
For workplace policies, explain which policies apply, where employees can find them and their obligation to follow lawful and reasonable requirements. Decide carefully whether policies are contractual. Incorporating a whole handbook into the agreement can make changing its contents more difficult.
Policies must be consistent with the agreement and the law. A policy update cannot simply remove agreed pay, reduce guaranteed hours or take away a contractual benefit. For example, if the contract promises private use of a vehicle, a new vehicle policy should not be used to withdraw that benefit.
Consult employees about policy changes as appropriate, explain what has changed and allow time for them to understand it.
Give the employee time before signing
Send the proposed agreement, job description and relevant documents before the start date.
You must tell the employee they can seek independent advice and give them a reasonable opportunity to do so. Consider and respond to issues they raise.
Resolve differences between the offer letter and contract before signing. Give the employee a final copy and retain your own records.
Getting the paperwork sorted early helps avoid a rushed signature on someone’s first morning. It is especially important when using a trial period.
FAQs
Does every employee need their own agreement?
Yes. Every employee needs a written agreement covering their employment. You can use a template, but tailor the details and check whether a collective agreement applies.
Do I need to copy every employment law into the contract?
No. Minimum rights apply anyway. Include the clauses the law requires, record agreed terms and explain key entitlements clearly. Avoid copying long sections of legislation that may become outdated.
Can I change the contract by updating a policy?
Generally, you cannot use a policy to change an agreed contractual term. Discuss the proposed change, obtain agreement where required and record the change in writing.
Can I reuse an old employee’s contract?
It may provide a starting point, but check every clause. Old agreements can contain outdated wording, different benefits or arrangements that do not suit the new role.
Can Employer Direct check an agreement I already use?
Yes. Contact Employer Direct for advice on existing agreements or help preparing a new one. A review can help identify unclear terms, missing provisions and clauses that do not match your workplace.
Get the foundations right with Employer Direct
You do not need to work through employment agreements on your own. Employer Direct’s contract template provides a starting point for preparing your employee agreements. It still needs to be completed and tailored to the role and your business.
Whether you are hiring your first employee, updating existing contracts or introducing a different working arrangement, Employer Direct can help you understand what to include and how the documents fit together. Contact Employer Direct for its contract template or advice on your existing or new employment agreements. Employer-Direct.co.nz | 0800 612 355
Disclaimer: The information provided in this blog is for general informational purposes only and should not be considered legal advice. While we strive to keep the information accurate and up to date, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained on the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. For specific legal advice tailored to your situation, please contact a qualified legal professional.
Comments