Why you must choose the right employment agreements for your staff

Most business owners know that it is against the law not to have a written employment agreement with their staff. However, what many business owners don’t know is that there are 4 different types of agreement to choose from – and choosing the wrong one could land you in hot water as some business have found out to their peril.

Why choosing the wrong contract could land you in hot water

When Jenny met Paul she thought that it was true love. The relationship started swimmingly: romantic candlelit dinners every week, nights at the movies, and expensive presents. After several unsuccessful relationships Jenny had felt she had found her man. She even introduced Paul to her parents. Jenny was soon thinking marriage, but Paul had other ideas.

Paul never saw Jenny as marriage material

Paul had just come out of a long term relationship with his ex girlfriend. He wasn’t ready to go back into another one. So, when Jenny came along he only ever saw it as a short term fling. However, Paul didn’t explain this at the outset. Lavishing compliments and gifts on Jenny was just his way, but Jenny took it to mean much more. So, when Paul eventually broke it off with Jenny, she felt deceived and misled. Acrimony followed.

Is this scenario happening with your employees?

Do you and your employees both want the same out of the relationship? Is one of you after a permanent relationship and the other only a casual fling? There are 4 different types of relationship possible, and if you both have different ideas about what the relationship is, it means your employment agreement doesn’t reflect both parties’ understanding. It is when this happens that employers end up in the Employment Relations Authority.

Even top companies get it wrong – but you don’t have to

Over the last year there have been two very high profile cases where employees have chosen the wrong contract for their employees and ended up being sued. The first case was the one involving Mr Bryson - the model maker who worked on the Lord of the Rings. He thought he was an employee and Three Foot Six Limited thought he was an independent contractor. They ended up in the Authority because the agreement wasn’t clear.

The second case was Susan Wood and TVNZ. TVNZ thought she was a fixed term employee. Susan Wood thought she was a permanent employee. Again they ended up in the Authority because the agreement wasn’t clear.

The moral from both these cases is choose your employment agreement carefully.

The 4 different types of agreement

The four types are as follows:
  • The Independent Contractor Agreement – this is not really an employment agreement at all. This is what every employer would want to use if they could, since independent contractors don’t have the rights employees are given by employment legislation.
  • The Fixed Term Employment Agreement – this is a very attractive alternative to the independent contractor agreement for most employees because at face value it allows the employer an early exit clause in case things go wrong. However, the law restricts the circumstances when you can use them. In a nutshell, you can’t use them to get round employment legislation. Bummer!
  • The Casual Employment Agreement – this is generally the next most attractive option for employers because there is no obligation upon an employer to provide work under a casual agreement. However, the flip side is that there is also no obligation upon the employee to turn up to work if he or she is unavailable. But, that’s not the biggest problem – a far greater concern is that a casual employment agreement may be deemed to be a normal employment agreement if it bears the hallmarks of full or part time employment. It is when this occurs that employers usually end up before the Employment Relations Authority.
  • The full or part time agreement – this is the type of agreement which most New Zealand employers end up choosing. Full and part time employees have all the rights afforded to employees by New Zealand employment legislation.

Different agreements are suitable for different employees

So, if you are employing someone make sure you understand the difference between the various types of agreement and which type suits which employee. If you don’t you could find yourself in the Employment Relations Authority like TVNZ and Three Foot Six Limited.
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