A recent survey by the Auckland Chamber of Commerce revealed that as many as 65% of small businesses don’t have employment agreements with their staff.   Some employers didn’t see the need, others just hadn’t got around to it.  

All employees are entitled by law to an employment agreement and job description. It is mandatory and the penalty for not providing this legal documentation is up to $10,000.00.  This aside, I would encourage a more positive outlook. An agreement should be a template for best practice human resources, for dealing in good faith and a tool for encouraging the loyalty, productivity and longevity of your staff.

There are some clauses that must be in an employment agreement, some that reflect the minimum entitlements whether included or not and some clauses that can be included to reflect the relationship between the employer and employee.

The average agreement need be no longer than a few pages.  Create a template agreement for all staff and then add variables such as the job description to the back as appendices.  Create a separate document that you can call “House Rules” or “Company Policy”.  Alterations are then easier to make in the event of changes to law or individual terms and conditions.  Think of the agreement as the framework on which the relationship between the employee and employer is built.     

The clauses you must include are:

Parties:  These are the people signing the agreement. Usually someone working for the company and the employee.  It is important that the correct legal name of the employer and employee are used.

Position:  Be clear about the nature and title of the job the employee is being employed to do.

Duties:  Every agreement has to have a job description either included at this point or attached.  This is vital if an employer and employee are to measure job performance or if an issue should later arise.  It is practically impossible to discipline for poor performance if the employee has never agreed to their job description.

Nature and Term of Agreement:  Now this one is not compulsory but so important treat it as such.  Most people entitle the document to distinguish it.  “Individual Employment Agreement.”  “Fixed Term Agreement.” “Casual Employment Agreement.”   However it is wise to spell it out in a clause.

Place of work: State at the outset where the employee will be expected to work.  Any changes to this can only be made after consultation.  There can be several locations or indeed flexible locations if the position demands it and the employee agrees. 

Hours of work:  Describe the hours of work, when they will be and how many.  Will it be full time, part time, casual, flexi or rostered shifts?  This has proven extremely important in the past in determining such things as overtime payments and holiday entitlements.

The law doesn’t require information on a company’s policy on tea, lunch and other rest breaks but it is wise to set them out.

Type of Pay:  At the very least set out the amount the employee can expect to be paid, how and when.  Details of any commission, bonuses, allowances and travel expenses can also be included but these are better in appendices where changes can be made easily as required.

Public Holidays:  Only the information on leave entitlements and payments for working on public holidays must be in the agreement.  In practice most include information on all leave provisions such as annual, sick, bereavement and parental leave.  Details on how to deal with jury service, annual closedown and medical certificates could also be added here.

Resolving Employment Relationships:  All agreements must include an explanation of the process to follow should an employment relations problem arise. 

Declaration:  All agreements must be signed to show that both the employer and employee understand and agree to the terms of employment. 

So there are only nine clauses that must appear in an agreement.  Of course there are many others that could be there.  Some like termination and disciplinary procedures are recommended, others such as how to deal with confidential information and copyright, privacy and restraints of trade can go in the house rules or company policy. 

There are many places to get help with employment agreements.  Most lawyers hold templates that can be adjusted to suit a company’s individual requirements.  The Employment Relations Service provides an employment agreement builder and other sites such as hughesdirect.com provide templates you can download.

Which ever way you go, remember to write it in English.  It presents a warmer, friendlier front and is much more likely to be understood by everyone concerned.