As an employer, having a claim brought against you can be an extremely stressful time. As well as potential financial losses, a personal grievance claim can be damaging to personal morale, team culture and the future of the business. Many small businesses find it difficult to recover when a large claim in swung in favour of the employee.
New Zealand employees have more rights than most countries and business owners can often find themselves in trouble by not following the correct protocol governed by the Employment Relations Act 2000.
Personal grievances can be taken against you or the business for a number of reasons including if the employee feels that they have been harassed, bullied or discriminated against, or unreasonably dismissed. Employers can reduce the risk of a personal grievance claim brought against them by following a process that is legally correct, consistently applied and of fair and justified reasoning. Having a strong and valid employment agreement in place that is upheld at all times, will help minimise employee and employer disagreements.
Why do I need and employment agreement?
It is surprising how many small businesses do not have an employment agreement in place. The document is a legally binding contract that protects both parties. As an employer, it provides protection by stating the employee’s obligations during employment and the procedure if these expectations were not upheld. This will then act as a point of reference and support if there are disagreements over performance or behaviour. A poorly drafted or generic contract may not be strong enough to hold up in the Employment Relations Authority or the Employment Court.
An employment agreement provides protection and clarity for the employee by stating their expectations and duties, along with any bonus schemes, kpi’s, salary and overtime agreements. As a legal requirement, the minimum wage and annual holidays have to be met and cannot be reduced in a contract. Additional holidays or bonus schemes can be individually tailored and must be upheld to avoid breach of contract.
An employment agreement can also protect the future of your business by adding clauses such as restraints of trade, trade secrets and notice period when terminating employment. This can protect the business when an employee has a specialist role that is difficult to replace.
In the absence of a written agreement, there can be ambiguity around performance and which may lead to tensions between the employer and employee which can have a negative impact on the future of their relations.
What to include in employee agreements
An employment agreement should include the rights and duties of the employee and what is expected of them and their role. The agreement should also outline the company’s policies including disciplinary codes and the consequence to the employee should the agreement not be upheld. If there is no agreement regulating these matters, it is commonplace for employers to come second when a disciplinary action results in litigation.
When hiring new staff, always go through the agreement together so any concerns or confusions can be discussed and diffused. Both parties should sign the agreement, although it can still be valid without both signatures. The employer is required to keep a copy of the employment agreement, and employees are entitled to a copy.
An area where small businesses could find themselves in trouble is over the blurred line of casual and permanent employment. If an employee is hired on a casual basis, they must continue to work as a casual employee. If there is no employment agreement in place and the employee performs their duties as a permanent employee would, they may be considered a permanent employee in the eye of the law. This could be problematic if the employer does not follow the correct procedure when reducing hours, or terminating employment.
An employment agreement should always be put in writing and looked over by your lawyer. There is an abundance of templates online, but your agreement should be individually tailored for each employee to protect your business and its goals. Do not rely on verbal agreement; they do not hold up in court. A written agreement provides both a clear understanding and evidence for both parties.
As we have discussed, a clear, fair and written employment agreement can prevent employee disputes, damaged to company culture, and even litigation. It is pivotal to ensure that your employment agreements have the correct provisions for the role and that those provisions are drafted in a way that is in accordance with the current law. Contact us today so we can protect the future of your business.