Building an Employment Agreement

Legal status and requirements

Under the Employment Relations Act (ERA) you must supply a written agreement to your new employee and they must sign it to indicate acceptance of your terms and conditions of employment. Until it is signed, it remains a draft Employment Agreement. The employer signs it before sending it out with a letter of offer. The prospective employee signs it to signify they accept the terms and conditions of employment. It may be, when the prospective employee reviews the draft, that some issues require clarification or further negotiation to finalise the draft.

Once it is signed by both employer and the prospective employee it has legal status as a contract. Once signed by the candidate, both of you must hold a signed hard copy.

Where an employer has provided an employee with an intended agreement the employer must also retain the ‘intended agreement’ even if the employee has not signed it or agreed to the terms and conditions specified in the intended agreement.

An intended agreement cannot be treated as the parties’ employment agreement if the employee has not signed the agreement or not agreed to the terms and conditions specified in the intended agreement. Make sure your records clearly distinguish between which have been sent out as intended agreements and which have been finalised.

 

Putting together the employment agreement

Employment agreements will vary across different industries and employment groups. You may already have standard employment agreements for your business. We recommend that you have these reviewed from time to time by your legal advisor to ensure they comply with legal requirements.

If you want help with individual employment agreements, you can use the Employment Agreement builder on the Ministry of Business, Innovation and Employment website.

CCH Workforce Manager also contains employment agreement templates along with guidance on policy and legal requirements (https://www.cch.co.nz/ or 0800 500 224).

Alternatively you can use a specialist provider, such as one of those listed below:

  • The Employment Relations service offered by the Ministry of Business, Innovation and Employment
  • Employers Assistance Ltd, https://www.employers.co.nz/ or 0800 15 8000
  • Employers And Manufacturers Association (EMA), https://www.ema.co.nz or 0800 800 362
  • Federated Farmers of New Zealand, https://www.fedfarm.org.nz or 0800 327 646
  • Or, of course, your local or preferred legal specialist

 

What needs to be in the Employment Agreement?

In general terms agreements should contain full details of all the matters discussed with the employee and should cover any potentially contentious issues. These would include:

  • Use of the firm’s telephone and payment for any telephone calls
  • Rules relative to working of overtime and who will authorise overtime
  • Specification of meal breaks and the regular breaks that every employee is expected to take
  • The position relative to any damage caused to company vehicles or plant and equipment and who will pay for it
  • Rules pertaining to the use of an employee’s vehicle and the reimbursement that the employee will receive for that use
  • Details should be included in the agreement of what the employer wants the employee to do — this should cover full details of the job specification and the terms and conditions of that job
  • Non-competitive clause, if any, should be included

The employment agreement should also cover such issues as:

  • Redundancy
  • Dismissal
  • The type of leave that is available
  • How to deal with grievances (this is mandatory under the Employment Relations Act)
  • Disputes
  • Performance management

It is also a good idea to state the employer’s policy on issues such as discrimination and sexual harassment in the workplace.

The section titled ‘What to include in the Employment Agreement’ sets out more detail of what should be included in an Employment Agreement.

 

Changes to agreements for existing employees

It is sometimes necessary to change an employment agreement for an existing employee, for instance when changes to employment conditions arise out of changes to employment legislation.

Under Section 63A (2) of the Employment Relations Act, when implementing any change to an employee’s employment agreement in addition to getting the employee’s consent, an employer must do at least the following:

  • Provide to the employee a copy of the intended agreement, or the part of the intended agreement under discussion
  • Advise the employee that he or she is entitled to seek independent advice about the intended agreement, or any part of the intended agreement
  • Give the employee a reasonable opportunity to seek that advice
  • Consider any issues that the employee raises and respond to them