In New Zealand, an employment agreement is the fundamental legal document between an employer and an employee. It underpins the Employment relationship and is essential for ensuring the terms and conditions are clear and agreed to by both parties. Under the Employment Relations Act 2000, every employee must have a signed, written employment agreement.
It can be tempting to recruit people into your business and not worry about the formalities, especially if they are friends and family. There is a fine for not having a written agreement in place, but this can pale in comparison to personal grievance costs should a dispute arise. What business owners need to understand is that if you have an individual come into your business to work and no employment agreement is in place, they are considered permanent employees and therefore entitled to all the protections provided to them under the Employment Relations Act 2000.
For example, a café worker on a day ‘trial assessment’ got paid out $9000, because there was doubt around whether or not the day was a ‘trial’ since no documentation existed, therefore she was classed as an employee, and it was a full days’ work undertaken. The Employment Relations Authority found in favour of the ’employee’, and she was awarded $119 for the day worked, $1890 for 4 weeks termination notice since she was an ’employee’, and $7000 for hurt and humiliation.
The pay-out to employees through personal grievances is ever increasing, so to mitigate risk to your business, the first place to start is ensuring your employment agreement is fit for purpose, customised to the businesses needs and is up to date.
So, let us explore the ‘Must have’s’ in Employment Agreements.
There are three important documents to give your new employee:
- Employment Agreement
- Job Offer
- Job Description
The Employment Agreement
The three key mistakes Employers make:
- Not having a written agreement in place at all
- Not getting the type of agreement right
- Not complying with employment legislation
There are a number of legally required clauses in your employment agreements but more than that, you need to have clauses that will offer you protection and the ability to address employment issues when they arise.
Some of these clauses may cover: motor vehicle usage, social media, bullying and harassment, jury service, suspension, garden leave, drugs and alcohol, medical incapacity, and pandemic/infectious diseases to name a few. Your ability to take action as a business owner and/or defend against a personal grievance is very reliant upon you HR policies and practices.
Another area that business owners get wrong is relying on the ‘90 Day Trial Period’ to terminate employment when the 90-day trial period cannot be used as it has not been implemented correctly. This can easily lead to a personal grievance.
What you Must Do with 90 Day Trial Periods
For an employer to be able to fall back on a 90DTP to terminate a new employee, you need to ensure:
- The employment agreement is signed before the employee sets foot on your premises to work on the first day. The employee must not have worked for the employer before signing the agreement.
If you get the employee to sign their employment agreement after they have started work, then that employee is now no longer considered to be ‘new’ and therefore the 90 Day Trial Period is null-n-void, and you cannot rely on it to terminate easily. Many employers make this mistake.
- The written clause in the employment agreement must include the specific wording as per section 67A of the Employment Relations Act 2000.
- When you provide an employment agreement to an individual, you must allow them at least 2 working days to seek advice.
- Your employee must have a copy of the signed employment agreement.
- The 90 Day Trial period must state that the 90 days starts from the first day of employment.
- The letter of offer must refer to the 90-day trial period so that it is well disclosed along with advising them they have the right to seek independent advice.
- You must have given notice of termination within the 90 days; however, it does not matter if they final day of this notice is outside the 90 days.
For employers, it is best practice to get advice on the use of this clause.
What is important to understand is that as an Employer, you can only discipline and issue formal warnings if you can prove that an employee has breached their terms and conditions or the company policies. For this reason, it is strongly recommended that when providing any policies or handbooks to employees, you get them to sign a declaration to say they have read and understood it.
Once you have robust employment agreements and company policies in place, it is essential you follow these and refer to them when needed. With changes in employment legislation happening regularly, you need to do regular reviews of your employment agreements so that you stay compliant with laws and legislation.
The benefit of having company policies is that you can update them at any time. If you make changes to employment agreements, you need to do this in consultation with the employee and seek their authorisation.
HR Consultants are a wealth of knowledge. Do not hesitate to contact one for a chat and to use them for advice. It could save you money in the long run.
Vicky O’Connor owns iRecruit & HR and you can find out more about what she does here: http://www.i-recruitandhr.co.nz/