Fixed-term and casual employees can be a great way to get the help you need while staying flexible.
Negotiating these types of contracts can be tricky, especially if you haven’t done it before. Here’s what you need to know - and then test yourself with our quiz.
You must do it by law, and it’s a great foundation for an employment relationship. Our new Employment Agreement Builder (external link) will help guide you through the steps to create a proper agreement.
Employees on fixed-term contracts are not contractors — they’re employed by you and entitled to all the same benefits as a permanent employee. They’re hired to do work that only exists for a set time frame, eg a short-term project or cover for parental leave.
When you’re hiring a fixed-term employee, the written employment agreement must:
Use our new Employment Agreement Builder (external link) to create a proper fixed-term agreement, including with space to type in a detailed reason for ending the fixed term. Here are two examples, with the employer’s reason for ending the fixed term written in italics:
1. Carter is hired to pick apples in an orchard. His employment agreement states:
The reason for it being a fixed term, and finishing at the end of the term, is the employee is being employed to pick apples at the employer’s orchard for the 2016 season, and there will be no further work available for the employee once all apples are picked.
2. Debbie, an accountant, is working at a medical centre as cover for parental leave. Debbie’s employment agreement states:
The reason for it being a fixed term, and finishing at the end of the term, is the employee is being employed to provide accounting cover while the employer’s accountant is on parental leave until 23 October 2016. There will be no further work available for the employee once the accountant returns from parental leave.
You also need to know that:
Minimum employment rights for employees (external link) — Employment New Zealand
Minimum leave and holidays entitlements (external link) — Employment New Zealand
David owns a busy painting business that’s won a bid to paint two office buildings, a three-person job that will take about two months.
David doesn’t have enough employees for this job, so he hires three new workers on two-month contracts. He explains the reason for the fixed term to his new hires, and puts it in their employment agreements. They know David can’t guarantee a permanent contract, or additional work past the two-month mark.
This is the correct approach.
Wendy owns a shop in a busy mall. Some of her previous assistants have been unreliable, so she’s wary of taking on a permanent employee. She decides to offer a three-month contract just in case things don’t work out.
But using a fixed-term contract to decide if someone is suitable for a role is illegal. Instead, Wendy could offer a permanent contract and include a trial period. If she does this, Wendy must remember:
When you’re done, follow the links in the answers for more details. NOTE: tax laws for contractors change on 1 April 2017. This quiz will be updated then.
A casual employee works for you intermittently or irregularly, eg someone called in at short notice to cover for sickness. They don’t have to accept every offer of work you make.
People who work for you casually are employees, and need an employment agreement just like any other staff member.
Use our new Employment Agreement Builder (external link) to create a proper casual agreement. It’s recommended you include an hours of work clause which sets out:
Also include an indication of days and time periods they might be asked to work.
If the work is in a regular pattern, they should be on a permanent part-time agreement.
Casual employees, like all other employees, are entitled to holidays. Because they don’t have set hours, you can agree with them that instead of earning annual leave, you’ll pay them an extra 8% of their salary or wage each pay.
They’re also entitled to sick leave and bereavement leave after six months of starting work with you if during that time they have worked:
Casual workers doing agricultural work like shearing, milking or fruit-picking are charged tax at a flat rate. Read Inland Revenue’s information about Payroll for casual agricultural workers (external link)