What Employment Agreement Should I Use For My New Employee?

There is more than one type of employment relationship, which means there is no “one-size-fits-all” employment agreement.

So how do you know what employment agreement you should give your new recruit?

That question can be answered by combining your answers to two more questions:

  • Do you have an idea of when this employee’s employment will end?
  • Do you know what minimum hours you want the employee to work each week?

IS THE END IN SIGHT?

For most employment relationships you don’t enter into an agreement having a sense of when it will come to an end.

Those staff tend to be called “permanent” employees. However, that label is unhelpful, because no staff member is ever truly permanent. They will leave of their own accord one day (in the best case because they wish to retire), assuming they have not been dismissed beforehand because the business has been restructured, or because of their own misdeeds or poor performance.

A better way to describe these types of employment relationships is to say that they are of indefinite duration. In other words, it isn’t the case that you don’t expect the employment relationship to come to an end one day, you just don’t know when that will be or the reasons why.

But what if you do have a sense that the employment is only going to last for a limited time?

These are known as fixed-term employment relationships. They can be used for very good reasons. You may need to cover an employee who is leaving to go on a period of parental leave, but intends to come back after that time. A fixed-term employee can fill that person’s space while they are away. Or perhaps you have a project you need additional resources for over a certain period. A fixed-term employee can provide that extra resource for that project.

There is another way to answer the question about the period of employment however, and that is to say that you know you only need the employee for various limited periods of time, but on an ongoing basis. To put it another way, you may want the employee to work on an intermittent basis over an indefinite period.

Confused? Hopefully not, but let’s go on to consider how you might answer the second question. We’ll then lay out five possible types of employment agreements that can arise when combining your answers to these two questions.

WHAT MINIMUM HOURS ARE REQUIRED?

Another way to categorise employment relationships is in respect to the number of hours worked. We can broadly categorise these as full-time or part-time.

It may be surprising to know that in New Zealand the number of hours required to be worked before you can be considered a full-time employee is not defined by statute.

However, the popular consensus is that a full-time employee works approximately 40 hours a week. For most workers, these hours are worked between Monday and Friday, 8:30am to 5pm. Having said that, there are plenty of other employees who work more or less than 40 hours, and outside those days and hours, and are still treated as full-time staff.

At some point, if the reduction of hours is well below 40 per week, the employee will be treated as part time. In practical terms, this has the effect that if you work approximately 30 hours or less, you will be treated as a part-time employee.

What if the hours of work are uncertain?

Leaving aside the issue where you roster the minimum hours from week to week so that the actual hours worked vary, it may be possible that you are not sure how many hours you require the employee to work per week. You know you may need some capacity from the employee, but you are not prepared to guarantee minimum hours. We will treat this as a third way to answer the question about hours of work.

A SUGGESTED GRID

To see how these two questions relate to form different types of employment relationships, we can put them into a grid like the one below:

The above grid gives us five different types of employment relationships to consider:

  • Full time, fixed term – Where the employment is for a minimum of about 40 hours per week, but the parties enter into the relationship having agreed when and how the relationship will end.
  • Full time, indefinite term – Where the employment is again for about 40 hours per week, but the parties do not enter into the relationship knowing when or how it will come to an end.
  • Part time, fixed term – Where the employment is for significantly less than 40 hours per week, say around 30 hours or less, and the parties have agreed when and how the relationship will end.
  • Part time, indefinite term – Where the employment is for about 30 hours or less, but the parties do not know when or how the employment will come to an end.
  • Casual – Where the employee will only be required to work intermittently and no minimum hours are agreed.

There are two important things to notice about the grid:

  • You cannot have a fixed or indefinite term employment relationship that has no minimum hours of work. These are commonly referred to as zero-hour contracts and the Government has introduced legislation to outlaw any possibility of such relationships.
  • You cannot have a full-time or part-time casual employee. That is because as soon as a casual employee starts working regular hours, they are no longer truly casual.

CONCLUSION

Asking the following two questions will help you decide what type of employment agreement to offer your new employee:

  • Do you have an idea of when this employee’s employment will end?
  • Do you know what minimum hours you want the employee to work each week?

Plotting your answers to those questions on the grid will lead you to the category of employment relationship suited to that staff member.

You will then know the right type of relationship to choose when you go to draft an employment agreement online or when getting further advice about any additional terms of employment you will offer.