Employed in ‘Good Faith’ – How to build an employment contract

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Employed in ‘Good Faith’ – How to build an employment contract

September 27, 2016

How to build an employment contract to establish a ‘good faith’ relationship with your employees.

The Employment Relations Act of 2000 and its subsequent amendment (2014), have made recruitment and hiring for employers and employees a better process than in the past. As with all legislation, it has needed tweaking as the recent changes to ban zero-hour contracts has shown but the foundation of the legislation has been designed help to build a good starting relationship between employees and employers.


Predominant to the legislation, covering trial periods and probation; recruitment and selection; union membership and training and development; is the need for every employee in New Zealand to have a written employment agreement (also known as a contract), approved, agreed upon and signed by that employee and employer. The two types are individual employment agreements and collective agreements.


Collective agreements are those involving a registered union and an employer on behalf of a group of employees and is legally binding for those union members – this stems from collective bargaining, where identical agreements can apply to employees according to their roles.


For all other employers, who are not involved with a registered union, the individual employment agreement is the foundation document for any chance of building a relationship based on ‘Good Faith’. You do not need an employment contract for contractors or volunteers but you can still draw one up.


The need for ‘Good Faith’, however, is built into the legislation and as such if the good faith rules are not followed the employer or employee can be found to be in breach of them by an employment court.
Good Faith covers the following wide ranging principles:


  • Acting honestly, openly and without hidden motives – not in a misleading or deceptive way.
  • Being responsive and communicative – working constructively and positively together.
  • Raising any issues fairly and timely and responding to them fairly and timely.
  • Providing relevant information that is carefully considered and ahead of time and as soon as possible – particularly giving proper opportunities for feedback where decisions are made that may result in redundancy or job loss.
  • Keeping an open mind and being prepared to be flexible about opinions and behaviour.
  • Treating each other with respect.


This part of the legislation is quite subjective, and where personal feelings and opinions can conflict, it becomes essential to have a framework, or foundation to your employment relationship. This is the document which is agreed upon at the beginning of the relationship – the Employment Agreement.


Apart from the need for every employee to have one, there is a requirement for each Agreement to contain compulsory clauses:


  • Names of employer and employee
  • Position and job title
  • Job description – the work they will do
  • Place of work – where that is or might be
  • Agreed hours of work – or an indication of working time arrangements
  • Their pay
  • What happens on public holidays – whether they will work on these or not
  • What happens if an employer decides to sell the company or restructures
  • What happens if a problem arises with the employment relationship – and it must say that personal grievances must be lodged within 90 days.


Also suggested to be part of these compulsory clauses are:


  • Hours of work
  • Shift cancellation details
  • Rules on rest and meal breaks
  • Legal requirements – such as four week’s leave, sick leave etc.
  • Trial periods


Trial periods can only be for new employees and up to 90 days in length and are only valid if included in the written employment contract before they start. The employee needs all the benefits of a permanent staff member extended to them while they are on the trial. There are differences between the 90-day trial and a probation period and these need to be considered – and clearly spelt out to an employee (good faith) so that they know you have as an employer been honest and fair. Two things you cannot do however, is use a probation period to get free work done – you have to pay a full wage during a probation period and you cannot use a fixed-term contract in place of a trial or probation.


This is starting to sound complex – and it is – it needs to be given thought and care to cover all possible circumstances that can arise with this relationship. Because this is a complex issue business.govt.nz has devised an excellent online aid for an employer to build an agreement that meets all the current legislative requirements and forms a ‘good faith’ foundation for a new employee.


To access this and get started on building your agreement visit this link https://eab.business.govt.nz/employmentagreementbuilder/startscreen/ where you can include the mandatory clauses and choose the options that will suit your business and your employees, and feel confident that you are building that foundation for your ‘good faith’ employer/employee relationship.



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