Employment Agreement

Employers must provide a written employment agreement

Law Change from 1 July 2011: Every employee must have a written employment agreement.

From 1 July 2011, all employers must have a written employment agreement for every one of their employees.  The law came in to force on 1 April 2011, effectively giving employers three months within which to comply.

The tricky part will be dealing with employees who have been with your company for a long time, who have never had a written employment agreement.  You cannot simply hand them a copy of the standard agreement all your other staff are on and require them to sign it.  You have to reach agreement with them as to what their terms and conditions actually are. Your standard agreement will be a good place to start.

Despite your explanation that you are merely complying with a new law, some long-standing employees will react badly when asked to discuss a written agreement.  They may perceive it to be an insult to their integrity or a covert means of reducing their existing terms and conditions.

If, despite your best efforts, you cannot reach agreement with your employee, and he or she refuses to sign the “intended agreement”, you should keep a copy of the unsigned intended agreement on your employee’s personnel file, together with proof that your employee has actually received the document. Keep copies of notes of all discussions and negotiations about the intended agreement to demonstrate that you have made a genuine and reasonable attempt to comply with the law.

If you don’t have a signed agreement a Labour Inspector can ask the Employment Relations Authority to impose a penalty against your company. If the Labour Inspector considers you have taken reasonable steps to reach agreement with your employee, penalty action is less likely to be taken.

Maximum penalties for employers have increased, from 1 April 2011, from $10,000 to $20,000. Before 1 April 2011 most penalties were around the $2,000 mark. I expect that average penalties will double to reflect the law change.

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