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employment

What must legally be included in an employment contract?

Key Takeaway

In New Zealand, every employee must have a written employment agreement. This agreement legally requires specific content, including names of parties, job description, work location, hours, wages, and a dispute resolution process. It must also explain how to seek independent advice. Any trial or probationary period, if used, must also be in writing.

Essential Content for New Zealand Employment Contracts

In New Zealand, an employment agreement (the legal document outlining the terms and conditions of employment between an employer and an employee) is a fundamental component of the employment relationship. It sets out the rights and obligations of both parties. The law mandates certain information that must be included in every written employment agreement.

The Requirement for a Written Employment Agreement

All employees (individuals employed by an employer to do work for hire) in New Zealand must have a written employment agreement [Source: Employment Relations Act 2000, s 63(1)]. This requirement applies to both permanent and fixed-term employees, full-time and part-time staff, and casual employees. A copy of the proposed agreement must be provided to the employee and they must be given a reasonable opportunity to seek independent advice on the agreement before signing [Source: Employment Relations Act 2000, s 63A(1)].

Mandatory Content under the Employment Relations Act 2000

The Employment Relations Act 2000 (ERA) specifies the minimum information that an employment agreement must contain. These are:

  • The names of the parties — This includes the full legal name of the employer (the person or entity that employs another person for wages or salary) and the employee [Source: Employment Relations Act 2000, s 65(1)(a)].
  • A description of the work to be performed — The agreement must outline the key duties and responsibilities associated with the role [Source: Employment Relations Act 2000, s 65(1)(b)].
  • The place of work — This specifies where the employee is expected to perform their duties [Source: Employment Relations Act 2000, s 65(1)(c)].
  • The ordinary hours of work — The agreement must detail the agreed-upon working hours, such as daily or weekly hours, and days of the week [Source: Employment Relations Act 2000, s 65(1)(d)].
  • The wages or salary payable — This includes the agreed rate of pay or salary [Source: Employment Relations Act 2000, s 65(1)(e)]. It must also be consistent with the Minimum Wage Act 1983 [Source: Minimum Wage Act 1983, s 6].
  • A plain language explanation of the dispute resolution process — Every agreement must outline how employment relationship problems (issues arising from or relating to the employment relationship) will be resolved, including referring the problem to the Employment Relations Authority if it cannot be resolved directly [Source: Employment Relations Act 2000, s 65(1)(f)].
  • A plain language explanation of how to seek independent advice — The agreement must include clear information on how the employee can obtain independent advice about the agreement's terms and conditions [Source: Employment Relations Act 2000, s 65(1)(g)].
  • Any other matters agreed upon by the employer and employee — This clause allows for the inclusion of additional terms and conditions specific to the employment relationship, provided they are lawful [Source: Employment Relations Act 2000, s 65(1)(h)].

Specific Clauses That Must Be in Writing (if applicable)

Certain specific clauses, if they are to apply, must also be included in the written employment agreement:

  • Trial Periods — An employer with fewer than 20 employees may include a trial period (a period of up to 90 days at the start of employment during which an employer can dismiss a new employee without an opportunity to raise a personal grievance for unjustified dismissal) in the employment agreement. For a trial period to be valid, it must be agreed to in writing in the employment agreement before the employee starts work [Source: Employment Relations Act 2000, s 67A(2)(b)].
  • Probationary Periods — Any employer can include a probationary period (a period of employment for assessment purposes) in an employment agreement. If a probationary period is to apply, it must be agreed to in writing in the employment agreement [Source: Employment Relations Act 2000, s 67B(1)].

Compliance with Other Employment Laws

While not all details from other legislation must be explicitly written into an employment agreement, the agreement must comply with and not offer terms less favourable than the minimum entitlements provided by other laws. These include:

  • Minimum Wage — The agreement must reflect at least the current minimum wage rate as set by the Minimum Wage Act 1983 [Source: Minimum Wage Act 1983, s 6].
  • Leave Entitlements — The agreement must ensure that the employee receives their minimum entitlements to annual holidays, public holidays, sick leave, bereavement leave, and family violence leave as stipulated by the Holidays Act 2003 [Source: Holidays Act 2003, s 4]. While the specific calculations might not be in the contract, the contract cannot contradict these statutory entitlements.
  • Duty of Good Faith — All parties to an employment relationship are subject to an ongoing duty of good faith (acting honestly, openly, and without misleading or deceiving each other) in their dealings. This principle underpins the entire employment relationship, even if not explicitly written as a clause in the agreement [Source: Employment Relations Act 2000, s 4].

When to Seek Independent Legal Advice

Individuals needing clarification on their employment rights or obligations, or who are unsure about the terms of an employment agreement, should seek independent legal advice. Information is available from government agencies such as Employment New Zealand, and free legal advice can be accessed through Community Law Centres.

Key Resources