LawHawk Guide to New Zealand Employment Agreements

For many businesses, their employees are the most important source of competitive advantage. You are only as good as the people you have.

A good employment agreement is the foundation for an effective employment relationship. By including the right provisions to attract and retain the best employees, and to incentivise them to work in ways that are good for them and the business, you can position your business for the best chances of success.

If you take a cookie cutter approach to your employment agreement, without really thinking about which options might add real value, you could be missing out on a great opportunity to be more successful in your business.

Working with law firm Ford Sumner, we have created an online employment agreement builder that allows you as an employer, to build an employment agreement that is tailored to your business, employees and the type of employment relationship you want to have.

This guide is intended to help you think through your options for your employment process, using examples from our own online employment agreement builder. If you have your own employment agreement form already, you may want to have a copy of it handy as you read, to see how it compares. Ford Sumner and LawHawk also offer a separate service to review your employment agreement, update it to reflect best practices and legal compliance, and then automate it for your own use with maximum efficiency.

We also work with Secured Signing to help our customers get their employment documents signed and returned in the most legally compliant and efficient way.

Whether you decide to prepare your employment agreement through LawHawk or elsewhere, these are the key things we think you should consider.

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Making sure you hire the right person

Before writing up the employment agreement, an employer needs to make sure it has the right employee. Doing this well will come down to things like:

As part of the hiring process, the interviewer will want to make sure that they don’t ask too narrow questions (e.g. just yes/no). The interviewer wants the prospective employee to tell all about themselves, including any particular things that the employer should know that the prospective employee may not want to volunteer. It’s not uncommon for people to hold back negative information and if the employer doesn’t ask for it, they may have only themselves to blame later on.

An example of how an employer can protect itself would be to ask the employee to confirm that:

The employer can ask them this in both the application process, and also as part of the written employment agreement. The employment agreement can also confirm the importance of these requirements to the employer, and that the employer is relying on them in deciding to hire the employee. The employment agreement can also state that if any of the information relied on is incorrect or misleading in any material respect, the employer may terminate the employee’s employment without notice. That should help to focus the mind!

Should an employer run a pre-employment trial?

Hiring new employees is difficult. Some people interview really well, and are able to provide great references, but then it turns out that they are not actually that good at the role.

Alternatively, some people who aren’t great at interviews tend to be real stars in the actual work-place.

It may seem that it would be a good idea to get a prospective employee to actually do some work before the employer makes them an offer, so the employer can see how the employee will actually perform on the job.

Unfortunately, this is a very risky approach, as doing this carries the risk that it make the candidate an actual employee, and therefore to give them all the rights of an employee – including protection against unjustified dismissal.

The better approach to take then is to actually offer them employment, but to make sure the employer includes the 90 day trial (for employers with less than 20 employees) or a probationary period (for larger employers).

An employer cannot use the 90 day trial approach for someone who has already started work or previously been an employee, so if the employer gets them working before giving them the employment agreement, it will be too late!

Legal Requirements for a New Zealand individual employment agreement

Before we go further, it is helpful to note some of the most important legal requirements for a written employment agreement, and what it must contain.

Form and content of individual employment agreement

(1) The individual employment agreement of an employee—

(a) must be in writing; and

(b) may contain such terms and conditions as the employee and employer think fit.

(2) However, the individual employment agreement—

(i) the names of the employee and employer concerned; and

(ii) a description of the work to be performed by the employee; and

(iii) an indication of where the employee is to perform the work; and

(iv) any agreed hours of work specified in accordance with section 67C or, if no hours of work are agreed, an indication of the arrangements relating to the times the employee is to work; and

(v) the wages or salary payable to the employee; and

(vi) a plain language explanation of the services available for the resolution of employment relationship problems, including a reference to the period of 90 days in section 114 within which a personal grievance must be raised; and

(b) must not contain anything—

(i) contrary to law; or

(ii) inconsistent with this Act.

LawHawk’s online employment agreement builder ensures all the required matters are covered off to a high standard.

How do I make an offer to employ someone?

As noted above, you need at least a written employment agreement, but best practices often involve a lot more.

There can be many documents that need to be sent out. These can include:

All of the terms of the employment relationship should be provided, in writing, at the same time. This will ensure there is certainty as to what the offer of employment is, and avoid disputes later on.

In the past, it could be quite an onerous and time consuming process to prepare all of these documents, and to have them customised to the particular employee. There was a risk that one or more of the documents used could be an old, out of date, version, and it could be difficult to get all the documents properly signed, returned and filed for good record keeping. It is also easy to leave someone else's details in the new agreement.

These days these issues are less prevalent, as document automation can ensure that the right versions of the documents are always used, and that they are customised as much as necessary for the particular employee. All of the required documents can be compiled at once.

The document automation can also pre-configure the documents for use within a digital signing workflow, which means they could all be sent out to the prospective employee by email, and can be signed from wherever the employee is, even on their phone. There is no need for more than one copy of the documents, as both the employer and the employee sign the same digital copy, and as soon as both have signed, each party automatically receives a set of fully signed documents.

Where previously there may have been issues or uncertainty as to whether the employee really did receive and agree to the various ancillary policy and procedure documents, all of that can be removed. It is very easy!

One question that does arise with the use of document automation and digital signatures is the speed at which it enables documents to be prepared and signed. An employment relationship is intended to be based on an equality of bargaining power, and as a result, the employee should have time to not only read and understand the agreement themselves, but also to take appropriate advice if they need it too. Just because the documents can be signed within seconds doesn’t mean that they should be!

When sending out the documents – even electronically – it is important that the employer allows enough time (ideally at least 1 week) for the employee to take advice and to come back if there are any issues to negotiate, before signing. This should ideally be made clear in the offer letter (and any cover email if the documents are sent electronically).

If the employer uses a digital signing system, the employer can also set a deadline for when the documents must be signed by, or the offer will lapse. This again can be a good way of ensuring certainty and removing scope for later argument. The digital signing system will be able to automatically send out reminders if it hasn’t been signed, keeping timing on track.

For the reasons above, the employer should definitely not let the employee start doing any work until they have signed everything that the employer need them to.

If all of this seems a bit too “legalistic” for the way that the employer want the employment relationship to work, you can always wrap other communications around it. There’s no reason why an employer can’t meet the employee for a coffee to welcome them on board and talk them through the documents, and make sure that the induction programme is all set out for them to make sure they quickly feel part of the team, giving the personal touch while also ensuring that all the legal i’s are dotted and t’s crossed.

Who are the Parties to the Employment Agreement and how should they be described?