In our ongoing series of articles on fundamental HR and people management practices, we take a look at the cornerstone document of the employment relationship: the employment agreement.
Under the Employment Relations Act 2000, every New Zealand employee must have a signed, written employment agreement that sets out the terms and conditions of employment.
Depending on the circumstances, an employee will either be covered by a collective employment agreement (negotiated between the employer and the union representing employees) or have an individual employment agreement (negotiated between employer and employee).
Having a robust, well-written employment agreement helps ensure that both employer and employee clearly understand what their rights and obligations are, what is expected of them, and what they can expect from the other party.
So let’s have a good look at employment agreements, with a focus on the individual agreement, including what they are, what they should and shouldn’t contain, the process for drawing them up, and why you need to get them right.
An employment agreement is a legal agreement formed when an employer offers a person a job and the person accepts it.
The agreement documents the relationship between the two parties, with the employee working for the employer under agreed terms and conditions, e.g. for a specified number of hours and rate of pay. It sets out the rights and responsibilities of both parties and that both parties have agreed to be bound by them.
As a baseline, an employment agreement must contain certain clauses (e.g. a description of the work to be done) and adhere to certain legal minimum rights and entitlements, such as minimum wage rates, paid annual and public holidays, paid rest and unpaid meal breaks.
Regardless of whether they have signed an employment agreement or their agreement provides less than the legal minimums, all employees are covered by the entitlements and protections in our employment laws.
Yes! It’s a legal requirement to have a written employment agreement for every employee, including casual and part-time workers.
If a Labour Inspector finds you don't have one for each of your employees, no matter when they started, you could be fined $1,000 per employee. The Employment Relations Authority can also order additional penalties of up to $10,000 for an individual employer and up to $20,000 for a corporate body.
Quite apart from the legal obligation to have an employment agreement for every employee, the agreement is an essential tool for defining and guiding the employment relationship, and provides evidence of the agreed terms and conditions of employment.
Not having a well-written agreement can create numerous issues, such as:
Yes. As mentioned, there are collective and individual employment agreements.
Collective employment agreements are negotiated between registered unions (representing union members) and employers. Employees must be on the collective agreement if they:
Additional terms and conditions can be agreed between the employer and employee, and should be set out in writing and signed by both parties.
Note too, that if a collective agreement covers your workplace, any new employee must get the same (or better) terms as the collective agreement for the first 30 days they’re employed. After 30 days, if the person hasn’t joined the union, you can both agree to make changes or sign a new individual agreement.
Individual employment agreements are negotiated by an employer and an employee and should be signed by both parties.
No. Independent contractors are self-employed and deliver outcomes to their clients. They invoice the client for their work and are responsible for their own tax and Kiwisaver payments.
This means the relationship is a commercial relationship, instead of an employment relationship, and subsequently covered by commercial laws instead of employment laws.
If your business engages contractors, you need to make sure the arrangement is legitimate, i.e. it is a genuine contracting situation rather than employment.
Always set the arrangement out in writing, clearly defining the terms of the agreement as that of a principal (the business) and the contractor.
What are the differences between contractors and employees? Read our blog post.
Every individual employment agreement must contain a number of legally-required clauses:
Other things, e.g. 4 weeks’ annual leave, do not need to be in the employment agreement but, by law, you must still provide them to your employee.
The list of legally required clauses is short, and we recommend adding best practice clauses into agreements to ensure you are covering your risk and being clear with employees. Some examples of this include:
Other agreed arrangements, such as a90-day trial or probationary period, a certain number of working hours, a roster, on-call availability, procedure for shift changes, specific notice period requirements, or annual closedown provisions, should be clearly set out in clauses in the agreement.
Remember, an employment agreement can provide more generous terms and conditions than the minimum legal rights and entitlements, but it can’t leave an employee worse off. Employees are entitled to these legal minimums even if they agree to lesser terms and conditions.
When drawing up an employment agreement, keep in mind that changing anything in the document later on requires a genuine reason for the change and consultation between both parties.
Because of this, we advise employers that aside from the provisions you are legally obliged to include, only add those that you’re sure you want to bind your workers to and that you want to be bound by.
Things that may need to be regularly reviewed or updated (e.g. performance measures, discretionary bonuses), or that apply to everyone in the organisation (e.g. code of conduct, workplace policies) are better issued as stand-alone documents or company policies or procedures, so you can alter them when needed.
Remember, too, that employment agreements must always comply with the latest employment and other relevant legislation, so review your agreements regularly and update them as appropriate. They’re a living document, and shouldn’t be left to languish in a filing cupboard somewhere.
Legally, the employment relationship starts when an employer makes an offer of employment and the employee accepts it. This can be over the phone, if you’ve made a verbal offer to a candidate, or in writing, if you’ve emailed or text them saying they’ve got the job.
That means you should draw up an individual agreement with your new employee and give it to them as part of the job offer.
Give the person time to consider the terms and conditions of employment, before they accept or reject it. They may have questions or want to negotiate different terms and conditions, e.g. the salary / wage or flexible work arrangements.
Once you are both happy with the agreement’s contents and the person accepts the job offer, get them to sign the agreement, give them a copy, and store a copy for future reference (having a digital system will make the process much easier).
No. The law clearly states that every employee In NZ must have a written employment agreement. Case law has also established that once a person accepts a job offer from an employer, even if it’s verbal, the employment relationship has started and the employee is entitled to all legal minimum entitlements and protections.
Relying on a verbal agreement of employment is risky for both employer and employee, and may result in hefty fines from the Employment Relations Authority.
Ideally, the process of negotiating and drawing up the employment agreement will raise any issues either party has with the terms and conditions before the employee begins work.
We have seen businesses including terms and conditions that don’t comply with legal minimums or mistakenly overlooking important elements because they are in a hurry or don’t seek expert advice.
The employment agreement sets up and governs the employment relationship, so be thorough and transparent from the outset. Including something in the employment agreement that the employee didn’t agree to may make it unenforceable.
Find out more about mistakes MyHR commonly sees with employment agreements.
his requires both parties to act in good faith, and follow the dispute resolution process that is documented in the agreement itself.
First, the employer or employee should raise the issue with the other party, providing detail(s) of the breach and reference to the agreed conditions in the employment agreement. There should then be an opportunity to respond, followed by negotiation to find an acceptable solution.
The employer may be justified in taking disciplinary action (e.g. in the case of misconduct) or instigating performance management if the employee is not meeting agreed objectives.
If the employment relationship is healthy, problems should be able to be flagged and remedied internally, but serious disagreements, noncompliance with minimum entitlements, or personal grievance claims may require mediation or legal resolution, e.g. by the Employment Relations Authority.
Learn more about effectively managing employee issues.
By law, employers must retain a copy of an employee’s individual employment agreement, intended agreement, or the current terms and conditions of employment.
Employees are entitled to request a copy of the agreement (or terms and conditions) at any time and employers must produce it as soon as reasonably practicable or face potential penalties from the Employment Relations Authority (ERA).
In March 2025, the government amended the Employment Relations Act 2000 to clarify that employers are required to ensure the agreement (or intended agreement) is readily accessible and that an employee doesn’t hold the only copy.
The amendment further clarifies that if a Labour Inspector finds an employer cannot produce a copy of the agreement, the employer has 7 working days to do so, by either producing the original agreement or providing a copy (in accordance with an employee request).
If the employer fails to do so, the Labour Inspector can bring an action in the ERA.
Even once an employee has left the organisation, you need to retain their employment agreement (along with other employment documentation) for 6 years.
With MyHR, you can be assured every employee has a tailored, watertight employment agreement and it is safely stored so you can produce it whenever needed.
The process for changing an existing employment agreement depends on the reason for the changes and their scale.
If the change will materially affect the employee - for example, you need to reduce their hours of work, or you want their tasks and responsibilities to change, in most circumstances you’ll need to consult with the employee, and update their employment documentation once you’ve reached an agreed-upon outcome.
In the case of minor or temporary changes, a letter of variation might be a better option than redrafting the whole agreement.
Any amendment to employment legislation automatically overrides what an agreement contains - depending on the nature of the change, a new agreement may have to be issued or potentially you’ll just need to include the new provision in new agreements going forward.
Otherwise, if the changes are coming from the employer, then an employee is not obliged to accept any changes to the terms and conditions of their employment agreement “just because”.
Sometimes, you’ll be able to manage these changes informally (for example, if it’s a small change, or doesn’t materially affect the employee). Most of the time, however, in order to change your employees’ terms and conditions, you have to consult with them by providing them with the proposed changes, seeking their feedback, hearing what they have to say, and then making a decision about the proposal.
Keeping up with changes can be difficult. MyHR’s expert team is always across new laws and amended regulations, and we ensure all your employment agreements are automatically updated and legally compliant. And if your business needs change, we’re on call to update your people processes and documentation.
An employment agreement can be terminated by either the employee (i.e.by resigning) or the employer.
Regardless of what triggered the termination, the correct procedure must be followed to ensure the process is fair and reasonable. Depending on the circumstances, if an employee is dismissed or resigns, they may be entitled to be paid notice, and must be given their final payment, including any entitlements owed to them e.g. unused annual leave.
Employment agreements can be complex and you need to ensure they are clear and legally valid.
MyHR is here to help you create robust individual employment agreements that cover all the lawful minimums and the specific requirements of your organisation and every role within it.