What must be in an individual employment agreement to comply with legislation? You might be surprised!

Most employers know that an individual employment agreement (IEA) must be in writing and that they are required to retain a signed copy (or the current terms and conditions of employment that make up the employee’s individual terms and conditions of employment).

But do you know what terms must be in (and out) of an IEA?

Section 65 of the Employment Relations Act 2000 states that an IEA must include:

• the names of the employee and employer concerned;
• a description of the work to be performed by the employee;
• an indication of where the employee is to perform the work;
• any agreed hours of work or, if no hours of work are agreed, an indication of the arrangements relating to the times the employee is to work;
• the wages or salary payable to the employee; and
• 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.

In addition, an IEA must include an employee protection provision (unless the employee is in the specified category of employees, colloquially called vulnerable employees).

As well as the requirements set out in the Employment Relations Act, the  Minimum Wage Act 1983 states that an IEA must not have more than 40 hours (exclusive of overtime) to be worked in any week, unless the parties agree to more than 40 hours.

The Holidays Act 2003 also requires every employment agreement to include a provision that confirms the right of the employee to be paid in accordance with section 50 for working on a public holiday.  Section 50 states that an employer must pay the employee the greater of:

• the portion of the employee’s relevant daily pay or average daily pay (less any penal rates) that relates to the time actually worked on the day plus half that amount again; or
• the portion of the employee’s relevant daily pay that relates to the time actually worked on the day.

Fixed term and casual employment agreements, and collective agreements, have different and/or additional compliance requirements.

Failure to have a written IEA or failure to retain a copy could result in a penalty of up to $10,000 for individuals or $20,000 for companies. This is for each breach, so the penalty could be imposed for each employee who does not have a compliant agreement!  From 6 May 2019, an employer’s failure to have a compliant written IEA for each employee allows the Ministry of Business, Innovation and Employment to issue an infringement notice which will have an infringement fee of $1,000. 

While the above terms and conditions are required for compliance, we recommend many other clauses be included in (and out of) an IEA for protection, flexibility and certainty.  At a minimum, businesses should consider terms such a trial period or probationary period, termination provisions, hours of work and availability, conflict of interest, confidentiality and intellectual property.  

Is your IEA complaint?  Does it protect you? Is it flexible to adapt to different situations that may arise?  We are happy to run our eyes over your IEA to double check! Our contact details are below.