What are individual employment agreements?
A healthy, functional employment relationship is always built around a clear understanding of what is expected from an employer and employee. Individual employment agreements can achieve exactly this; helping both parties understand exactly what’s expected of them and what they’re entitled to in return.
A well-written agreement means misunderstandings are less likely to occur. If a problem does arise, then the employee and employer can refer to the employment agreement to clarify the issue.
When are individual employment agreements used?
As its name suggests, an individual employment agreement covers one employee and one employer. They can be used when:
✔ There’s no collective agreement that covers the employee’s job, or
✔ There is a collective agreement, but the employee is not a member of the relevant union and doesn’t want to join it.
Individual employment agreements are used for full-time, part-time and casual staff, and are negotiated by the employer and employee. The terms and conditions of employment should be discussed, agreed upon and then inserted into the employment agreement before the employee starts work.
An individual employment agreement should always be signed by the employee and the employer, showing that both parties agree with it.
If an employee isn’t happy with something in a proposed employment agreement, they should tell their employer as soon as possible and try to find a resolution to the issue.
Are individual employment agreements the law?
Crucially, individual employment agreements are more than just a ‘nice to have’. In most cases, having agreements in place for permanent employees is a legal obligation.
Failure to create an individual employment agreement and give the employee a copy in writing may result in a fine of $1,000 per occasion.
What clauses must be included?
An individual employment agreement must be made in writing. It can contain any clauses that an employer and employee have agreed on.
However, the employment agreement must include at least the following terms:
Names – The names of both the employee and employer.
Job description – This should include the title of the role and a list of duties the employee will be expected to perform.
Nature of employment – Whether the role is permanent or fixed-term.
Place – Where the employee’s workplace will be, as well as any travel expectations.
Hours – The agreed hours, or an indication of the hours that the employee will normally work. This might include the number of hours, the start and finish times, and the days of the week the employee will work.
Pay – The wage rate or salary payable (which must be equal to or more than the relevant minimum wage) and how it will be paid.
Public holiday pay – A statement that the employee will receive at least time-and-a-half for working on public holidays.
Protection provision – An employment protection provision may apply if the employer’s business is sold or transferred, or if the employee’s work is contracted out.
Probation period – If the employer decides to use a trial or probation period (normally 90 days in New Zealand), this must be included in the agreement.
Processes for resolving problems – Every agreement should have a plain-language explanation of the services available for resolving disputes and problems. This should include a clause that personal grievance statements be raised within 90 days, and sexual harassment personal grievance statements be raised within 12 months.
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Other common clauses
Beyond the compulsory clauses outlined above, additional terms can be agreed on to suit the needs of the organisation and the employee. Other common clauses include:
Paid annual leave entitlements – Full-time employees have the right to 4 weeks of paid annual leave. Part-time employees are also entitled to 4 weeks, but their pay is based on how many hours they work each week on average. An employer may choose to offer more annual leave, but never less than these minimum entitlements.
Paid sick leave entitlements – After an employee has worked for the same employer for 6 months, they are legally entitled to 10 days of paid sick leave annually. An employer may specify a larger paid sick leave entitlement in the agreement, but never less than this.
Redundancy – The agreement might include an indication of how much notice an employee will receive in the event of restructuring.
Termination – Beyond redundancy, the agreement could also include a termination clause.
Notice period – Many agreements specify the amount of notice required from the employer and employee to end the employment relationship.
What clauses should not be included?
An individual employment agreement cannot include any terms that are inconsistent with the Minimum Employment Rights or any other employment law legislation (unless they are better for the employee).
If an employer breaches any legal requirements for an individual employment agreement, the employee or a labour inspector can file a claim with the Employment Relations Authority. This can result in the employer paying a financial penalty.
Terminating individual employment agreements
An employment contract can be terminated by either the employee (i.e, through a resignation) or the employer.
Regardless of what leads to the termination, the correct procedure must be followed. This ensures the process is fair and carried out in accordance with proper workplace procedures. Depending on the circumstances, if an employee is dismissed or resigns, they may be entitled to a set period of notice. They must also be given their final payment which includes any entitlements owed to them, such as accrued but untaken annual leave.
Make sure you clearly outline the terms relating to ending employment in your employment agreement and employee handbook.
If you own a Kiwi business and have any questions about employment agreements, call Employsure’s FREE Advice Line on 0800 568 012.
