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Employment Agreements – all you need to know

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Today we talk about the Employment Relations Act 2000 (the Act), in relation to employment agreements – what they cover, what needs to be in them and how you can best protect yourself and your staff.

First, the agreement must be in writing.  Why?  Well, it provides an employer with the opportunity to clearly communicate their expectations to an employee. An effective agreement will also include a job description which provides the first step in setting effective performance standards and management.

The need for a written employment agreement applies to all staff, from permanent full-time through to casual (including relief milkers). Independent contractors such as variable order and 50/50 sharemilkers, or agricultural contractors are not covered by the Act, although we still recommend that you have written contractor agreements with them also.

So, what must a written individual employment agreement contain? The following are essential terms that must be included in every employment agreement:

  • The correct legal names of the employer and employee.
  • A description of the work the employee will do.
  • An indication of the place of work.
  • The agreed hours or an indication of the hours of work.
  • The wages or salary the employee is to be paid.
  • Requirement to pay at least time and a half if they work on a public holiday, and a day off in lieu of work performed on a scheduled day of work that falls on a public holiday.
  • An explanation in plain English of what services is available to resolve employment relationship problems including advice that personal grievances must be raised within 90 days.
  • All employees are entitled to the minimum wage (currently $21.20 per hour) – regardless of whether you employ them full-time, part-time or casually. It is important that you always know the current minimum wage rates to ensure you are paying at or above the prescribed minimum for actual hours worked in each and every pay period. Please note that payment for hours cannot be averaged over a season. So if you pay your staff weekly and your employee works 65 hours one week he/she must be paid no less than $1378.00 gross (65 x $21.20) for that specific pay period.
  • If you and the employee agree to a ‘trial’ period, this must be included in the written employment agreement and must be signed by the employee before they commence any work for you.

Federated Farmers provide good farming specific of employment agreements which can be bought online – permanent and fixed term employment agreements, a casual employment agreement, and a contract milking agreement.  These are updated regularly and contain all the essential terms you need in the contract.  If you need something more bespoke, then we can help you draft an agreement that meets your specific industry/job needs.

It is really important that you, as employer, keep accurate records of hours worked, wages payable (and paid), and leave taken for each employee.  You are legally required to keep these records for six years, so make sure you have a robust and secure record keeping system in place.

All employees are entitled to at least four (4) weeks of paid annual leave (after working for you for a year).  Please note that you cannot ‘contract out’ of these rights.  You can provide more leave for employees than this, but you cannot provide less!

In some circumstances, you, as the employer, may provide accommodation for your staff.  You are free to agree the value of the accommodation provided and that the cost of that accommodation will be deducted from the employee’s wages before they are paid. Where this occurs, the agreed value of the accommodation will be deemed to be “wages” for any minimum wage calculations that may be necessary. Again, clearly recording these arrangements in writing is the key to minimising risk of dispute.

We all spend time thinking about the start of a job but often we give little consideration to what happens when the employment relationship ends.  There are a number of reasons for employment to end, which should also be considered when preparing an employment agreement, including:

  • Resignation – all employees can choose to resign but they must give you notice as stated in their employment agreement. You should ask for their resignation to be given to you in writing. You can confirm you accept it verbally, but it is always good to follow this up in writing.
  • Non-performance – you can end an employment relationship due to non-performance or misconduct by the employee. There are a number of commonly accepted grounds including failure to carry out their tasks, misconduct, abandoning the job (i.e., not turning up for work for a number of days without advising you).
  • Redundancy – you may find that a position becomes surplus to your business needs, leaving an employee without a position. If you are considering making an employee redundant, it must be the position that is surplus to your business needs, not the person! In farming, positions may become redundant in situations including the sale of your farm, financial difficulties (although this needs to be financially justifiable), or the end of a sharemilking contract.  But remember, you cannot terminate an employment agreement just because calving has finished, or the busy times are over. If you only require staff for a brief period, then you should employ them on a fixed term agreement.

With employment law the procedure you follow when dealing with staff is as important as the reason for the decision.  It is common for employees to succeed in unjustified dismissal or unjustified disadvantage claims where the substantive action is considered justified, but the processes followed were inadequate or unfair.  We strongly suggest you seek advice from a trusted advisor before commencing any employment processes.

For you, as the employer, there may be other issues that are important to you and your employees that are not covered in a standard agreement.  At Hamertons, we have specialised knowledge and expertise in all aspects of employment law.  Let us know how we can help you.

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