New Zealand employment law appears complex and confusing when looking from an outside view although in some ways there are many similarities to other countries. There are specific regulations on employment contracts, leave and pension contributions that must be understood fully. For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in New Zealand.
Key Factors to Consider When Employing in New Zealand:
There are several key areas to be aware of within New Zealand’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the New Zealand laws and rules for both New Zealand employees as well as foreign nationals.
New Zealand has traditionally had a workforce skilled in construction and production but there has been a long-standing shift towards employment in the services sector. A state-operated social welfare system provides benefits during sickness, unemployment, disability and retirement and is funded by general taxation.
Every employee in New Zealand must have a written employment agreement that is agreed upon and signed by an employee before they start work. Employment agreements come in a variety of shapes and sizes depending on the job description, but there are certain mandatory clauses that every employment agreement must contain by law.
Under the Act, there are two types of employment agreements that cover all employees, regardless of profession or industry. These are individual employment agreements and collective agreements.
The official site for Employment Law in New Zealand is http://www.dol.govt.nz/
Severance / Redundancy Pay
There is no statutorily defined severance or redundancy pay scheme in New Zealand. Therefore employees are only entitled to severance pay or redundancy payment if it stipulated in the employment agreement.
Termination of Employment
Notice periods are not defined at law and instead should be ‘reasonable’. Generally a notice period should be specified in the employment contract and agreed upon by both parties. The notice period can be different for the employment period and the trial period. According to the NZ Consumer Affairs Bureau: “most employment agreements used by an employer may include a four weeks’ notice of dismissal clause in most of their employment agreements, but only two weeks’ notice for someone employed on a trial period“.
In a trial period, an employer may terminate without needing a reason, and the employee cannot file for unfair dismissal on personal grounds, e.g. unless it is for something such as unlawful discrimination based on gender or race.
Probation Period Termination
During the probation period, the employer must follow a clear disciplinary or dismissal procedure. Also the employer cannot terminate without reason at the end of the probation period. Employees on probation have the full rights of unfair dismissal claims. Likewise, full employees may not be fired without clear reason and fair procedure.
In New Zealand ‘trial’ is distinguished from ‘probation’ and follow different rules. In either case it must be clearly specified in an employment contract and agreed upon by both parties.
An employer may employ someone on a trial period of up to 90 calendar days, but only if it is the first time you have been employed by this employer and by mutual agreement.
Probation is defined as the beginning of someone’s employment, where “the employee can show what they can do and the employer can assess them for suitability for permanent employment”. A maximum length does not appear to be specified at law and instead viewed as being long enough for the employee to demonstrate their suitability for the job.
It is unclear whether an employment agreement can have both a trial and probation period, or only have one or the other, but the implication is that it should have one or the other.