Employment agreements

Posted June 1st, 2007 by Dr James Pratt

The value of employment agreements

The Employment Relations Act 2000 requires employers to have written employment agreements for all their staff.

However employment agreements aren’t just a legal requirement – they’re also a common sense way of making sure everyone is clear about where they stand and what’s required from them.

For instance, if you were negotiating with a supplier to provide $40,000 of goods or services to your business every year, you’d want a written contract in place to make sure both you and the supplier fully understood the terms of the agreement. It therefore makes sense to have a written agreement with a person who is going to supply $40,000 of labour and expertise to your business every year.

It’s in both your interests to do things properly right from the start.

The disadvantage of verbal agreements

Relying on a verbal agreement and a handshake is not sufficient.

The disadvantage of this approach is that if there’s a disagreement later on, and both parties have nothing to rely on except what they remember (perhaps very differently) from a conversation, there could be problems. For instance, the staff member may have interpreted a comment about 'looking at pay increases later' as a commitment from you to increase their salary.

If there’s nothing in writing, it’s going to be very difficult for either of you to prove your case.

As a result, you may end up going through a dispute process with your staff member that could have been prevented by a simple written agreement.

The advantages of written employment agreements

Disagreements are more likely when employees are unclear about their duties and what is expected of them. You can use the employment agreement to spell out hours of work, work duties, performance standards and expected outcomes.

Some employers may avoid written agreements because they think they have to be big, complex documents. The truth is that they don’t. An employment agreement sets out the conditions of employment, the rights and responsibilities of both parties, and the processes to use if a problem does develop.

Written employment agreements do not have to be expensive either. You can build your own employment agreement using the Department of Labour's free online Employment Agreement Builder. This tool will let you create a customised agreement in a few minutes.

Further information

Any employer who’s not sure about any aspect of employing staff can call the Employment Relations Infoline on (0800) 20 90 20.

Kiwi Saver starts 01 July 2007 ›
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