New Zealand's employment relations framework is built on the contractual provisions set out in the individual or collective agreements negotiated between employers and employees, overlaid with statutory obligations in respect of "good faith" and certain minimum standards in employment legislation.

Issues arising on hiring individuals

Immigration

Employees who do not hold New Zealand citizenship, a New Zealand residence visa, Australian citizenship or an Australian permanent residence visa, must obtain a valid work visa to work in New Zealand.

The following types of work may not require a work visa: (1) business negotiations; (2) short-term sales trips; (3) work for official trade missions recognised by the New Zealand government; and (4) work for overseas governments.

"Immigration New Zealand" is the government department which manages work visas. There are various requirements that employees will need to meet such as: (1) be in good health and of good character; (2) have a passport that is valid for at least three months past the date of leaving New Zealand; (3) be genuine in wanting to work in New Zealand; and (4) have the right visa for the visit.

Employment structuring and documentation

Employment agreements may be either individual, where the parties are the employer and the employee, or collective where the parties are the employer and the trade union. In either case the agreement must be in writing.

An individual employment agreement must include the names of the employee and employer, a description of the work and the place of work, hours, salary, a "plain language" description as to how to solve employment relationship problems, an employee protection provision in case of contracting out, sale or restructuring and a provision that confirms the right of the employee to be paid time and a half for work on public holiday in accordance with the Holidays Act 2003.

The Employment Relations Act 2000 (ERA) allows for fixed term agreements that specify that the employment will end at the close of a specified date or period, on the occurrence of a specified event or at the conclusion of a specified project. However, before an employee and employer agree on such an arrangement, the employer must have genuine reasons based on reasonable grounds for a fixed term agreement.

The employer must advise the employee of when or how his employment will end and the reasons for his or her employment ending in that way.

Issues arising during the employment relationship

Wages, annual leave, health and safety

In New Zealand, the minimum wage is currently NZD 15.75 (approx USD 11.35). The minimum wage is usually increased on 1 April each year

The Holidays Act 2003 governs annual leave, public holidays, sick leave and bereavement leave. Employees are guaranteed not less than four weeks' paid annual leave per year, up to eleven paid public holidays (where time and a half and an alternative day or a day in lieu is provided to most employees who work on such a holiday), five days' paid sick leave per annum accruable to a maximum of twenty days, and paid bereavement leave on the basis of three days for a close bereavement and one day for other bereavements provided certain criteria are met. These are all minimum entitlements and employment agreements may improve on these rights.

The Health and Safety at Work Act 2015 (HSAWA) took effect from 1 April 2016 and replaced the Health and Safety in Employment Act 1992.) The HSAWA imposes obligations on individuals in control of a business or undertaking and others in the workplace, and is designed to protect all people from harm in a workplace. Harm includes physical and psychological harm. The HSAWA is penal and parties who are prosecuted successfully will have a criminal conviction. The HSAWA is strict liability in nature, and the only defence to a charge is to prove there has been a complete absence of fault. Penalties are substantial. The new statutory scheme has increased the obligations on employers, company officers and directors and employees, and substantially increased potential penalties for breaches.

Trade unions

The ERA recognises the right to organise into trade unions, have that right recognised by the employer, and legally withdraw work. A key objective of the ERA is to promote unions and collective bargaining.

Consistent with this objective, the ERA specifically recognises trade unions as the only lawful representative of employees' collective interests. The ERA entitles unions to represent their members in relation to any matter involving their collective interests, and it also allows unions (and other representatives) to represent employees in relation to their individual rights (for example, unions can represent employees at mediation and in court actions), provided that they have the employee's authorisation.

Collective agreements can only be concluded by a trade union and an employer. Employees cannot band together to negotiate a collective agreement unless they are formed and registered as a trade union. Therefore, while union membership is voluntary, if an employee wants to be involved in a collective agreement and to bargain collectively, he or she must be a member of a union.

Social insurance

KiwiSaver is a voluntary, work-based savings initiative set up which is governed by the KiwiSaver Act 2006. It is administered by the Inland Revenue Department and enables employees to save for their retirement with the incentive of assistance (in the form of a compulsory employer contribution) from the employee's employer.

KiwiSaver savings are made up of employee contributions, government contributions and employer contributions.

Employer and employee contributions are calculated using the employee's gross salary. The employee may elect how much of their salary that they wish to have applied to KiwiSaver (3%, 4% or 8%). The current compulsory employer contribution to KiwiSaver is 3%.

Issues arising on termination of the employment relationship

Business transfers

The ERA defines a restructuring in relation to an employer's business as: entering into a contract or arrangement under which the employer's business or part of it is undertaken for the employer by another person; selling or transferring the employer's business (or part of it) to another person; or the termination of a contract or arrangement if the work carried out under the contract or arrangement is to be carried out by another person, whether by a new person or by the person for whom the employer carried out the work.

Where a restructuring is proposed, an employer is obliged to consult with the other party/new employer about whether existing employees will transfer and if so, on what terms.

The process the employer must follow must be set out in an employee protection provision and this must be contained in all existing employment agreements. The other party or new employer is not obliged to offer employment to existing employees, other than vulnerable employees.

In a sale situation, the parties may negotiate the transfer of existing accrued leave liabilities. Alternatively, accrued and undertaken annual leave may be paid out to employees by the vendor on termination. Existing KiwiSaver (superannuation) entitlements transfer between employers.

Terminating employment

Terminating an employment relationship usually happens in one of four ways.

Resignation or Retirement

Employees can resign at any time, provided they give notice to the employer in accordance with the terms of the employee's employment agreement, or in the absence of an employment agreement, reasonable notice to the employer.

Abandonment

Abandonment of employment usually occurs when an employee is absent from work for an extended period (usually three working days) and they fail to notify the employer or provide a good reason as to why they are not at work.

Dismissal for conduct or performance

An employer is entitled to dismiss an employee for unacceptable behaviour, conduct or performance. A lawful decision to dismiss must comply with the ERA. The test (as set out in s103A) is: whether the employer's actions were what a fair and reasonable employer could have done in all the circumstances at the time the dismissal or action occurred.

Redundancy

An employer may also terminate employment in a genuine redundancy situation (where the role performed by the employee is no longer required by the employer). If, following a consultation process, the employer determines that the employee's role is not required, the employer must consider any opportunities for redeployment before terminating employment. In New Zealand, if an employee claims unjustified dismissal arising from termination by reason of redundancy, it is dealt with as a personal grievance.

Redundancies are commonly challenged for procedural defects such as a lack of consultation, failure to consider alternatives, the fairness of criteria in selecting those to be made redundant and the giving of proper notice.

Discrimination

The Human Rights Act 1993 protects people in New Zealand from discrimination in a number of areas of life, including in employment. There are a wide range of prohibited grounds of discrimination which include sex, marital status, religious and ethical belief, colour, race and ethical or national origin, disability, age, political opinion, employment status, family status and sexual orientation. The employee must choose whether to pursue a complaint through the Human Rights Commission or through the Employment Relations Authority; they cannot do both.

The Human Rights Commission has the power to make declarations and to order the payment of damages. Discrimination cases have not traditionally been common in New Zealand however damages awards have increased over the last 18 months, potentially making it a more attractive option for employees and former employees.

Published in collaboration with L&E Global: an alliance of employers’ counsel worldwide

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