Types of employment (NZ)
Overview of employment classifications in New Zealand - Permanent vs Fixed Term vs Casual Employment
Contents
Determining the type of employment of a potential employee
Contractor Relationships (Independent Contractors)
Overview
Employment relationships are covered by legislation such as Employment Relations Act 2000, Holidays Act 2003, Wages Protection Act 1983, Minimum Wages Act 1983, Parental Leave and Employment Protection Act 1987, Health and Safety at Work Act 2015 just to name a few. Employment relationships can also be subject to decisions and rulings made at the Employment Relations Authority and the Employment Relations Court.
Determining the type of employment of a potential employee
When determining what the reality of the relationship for a new hire / engagement, things to consider include:
- How many hours would be required to be worked each week?
- Will work be allocated in advance by a roster? Or will there be set times of work each week?
- Do you require notice if the employee is going to take leave?
- Will employment be continuous, or will there be an end date it would conclude?
- If an end date, is there a genuine business reason for this?
If a genuine reason exists for why work is required for a finite period, then a fixed term agreement type may be deemed suitable.
If there are consistent or predictable patterns of work, then a permanent or fixed term agreement would be best applied.
Permanent employment
This is the most common type of employment relationship, and can either be full-time or part-time, salary or waged. The employment relationship is ongoing, and there is an expectation of continuous work, whether it is 5 hours each week, or 45 hours each week available each week
Permanent employees must have worked continuously with the employer for a period of:
- 12 months to be entitled to annual leave.
- 6 months to be entitled to sick leave, bereavement leave, parental leave and family violence leave.
- If the employee is between the ages of 18 and 65, and employed the employee must be automatically enrolled into KiwiSaver, unless they opt out.
Fixed term employment
A fixed term employee’s employment will have specified start and end dates (or may end when a particular event occurs) and can only be applied when there is a commercial justification for the fixed term engagement.
What is a commercial justification?
It is a business reason for requiring the support of an employee on a temporary basis. This could look like:
- Covering a period of parental leave or extended leave.
- Providing support during a peak trading season.
- Operating a pop-up shop.
Similar to Permanent employees, fixed term employees can be full time, part-time, on a salary, or wage.
A fixed term employee has the same employment entitlements as permanent employees. However, if employed on a period less than 6 months, will not be legally entitled to sick leave, bereavement leave or family violence leave, unless the business extends this to the employee.
If the fixed term duration is for a period of 12 months or less, annual leave can either be accrued, or paid at 8% of their gross earnings alongside their regular pay. To note, that if you opt to pay the 8% annual leave loading, this must be agreed and captured in the employment agreement and be recorded separately on the payslip.
Casual employment
While not defined in legislation, a casual employee would typically work on an ‘as and when required’ basis.
This would mean that casual employees would typically be hired to provide adhoc or intermittent support. Eg. In the instance an employee called in sick. Therefore they would not have any expectation of ongoing or regular work.
Casual employees:
- Are able to decline work when it does not suit them,
- Have the same rights to rest and meal breaks.
- Do not have regular work patterns.
- Do not have expectations of ongoing or regular work
- Do not accrue annual leave, and instead, are paid annual leave loading in their normal pay cycle, in addition to their agreed remuneration rate.
If a casual employee, following 6 months of continuous employment, meets the below requirements, then they will become entitled to sick leave and bereavement leave and domestic violence leave.
If following 6 months of employment, the employees have worked:
- An average of at least 10 hours per week; and
- At least one hour per week or 40 hours each month.
It is also important to note that if a casual employee would have worked a day that was a public holiday, the casual employee should be paid for that day as a public holiday not worked. The same applies if the business is open and the casual employee is not offered work. This is because had it not been a public holiday, the employee would have worked it.
Contractor Relationships (Independent Contractors)
Independent contractors are engaged under a contract for service to perform services to the company.
Contractor relationships are required to abide by the Health and Safety at Work Act 2015, but are otherwise not covered by employment law (if they are truly a contractor relationship), and are governed by general civil law.
Visit our Contractor Relationships in New Zealand knowledgebase page to learn about contractor relationships and determining whether a worker is an employee or a contractor
Support Options
If you would like to discuss anything in this article further, please call MyHR on 0800 69 47 69 or email help@myhr.works.