Table of Contents Introduction... 3 Distinctive Features of the Employment Environment... 4 Key Changes in Recent Years... 5 Key Breakpoints Related to Number of Employees... 5 Start of Employment... 6 Contract of Employment... 6 Types of Contract... 8 Formalities... 8 Non-Compete and Other Clauses... 9 Trial Periods... 9 Employment of Foreign Workers... 10 Other Important Recruitment Topics... 11 Active Employment... 12 Pay... 12 Working Hours... 14 Holidays And Statutory Leave... 16 Equal Opportunities... 19 Health and Safety... 20 Training... 22 Social Security... 22 Social Affairs and Industrial Relations... 23 Framework for Employee Participation and Representation... 23 Works Council/Employee Representatives... 24 Collective Bargaining... 24 Industrial Action... 26 Termination of Employment... 27 Types of Termination... 27 Notice... 29 Termination Indemnity/Severance Payment... 29 Termination at Retirement... 30 Organizational Change... 30 Collective Dismissals... 32 Managerial Dismissals... 34 Web Addresses... 34 Contact Us... 36
Start of Employment Contract of Employment Overview The employment environment in is an evolved combination of legislation, common law decisions, and negotiated conditions found in both collective and individual agreements. The Employment Relations Act 2000 (ERA) is the framework legislation for establishing employment terms and conditions. The ERA replaced the Employment Contracts Act 1991, which on its introduction was described as the most significant change in nearly 100 years of 's employment law and labor relations. The ERA returned to some of the traditions of labor law, such as the promotion of collective bargaining and encouragement of trade unionism. Legislation Many Acts of Parliament affect the employment relationship and must be recognized when drawing up an individual or collective agreement and maintaining an employment relationship. While they cannot be contracted out of, they can be improved upon. In addition to the ERA, the most important Acts include: Equal Pay Act 1972; Contractual Remedies Act 1979; Wages Protection Act 1983; Minimum Wage Act 1983; Parental Leave and Employment Protection Act 1987; Health and Safety in Employment Act 1992; Human Rights Act 1993; Privacy Act 1993; Protected Disclosures Act 2000; Employment Relations Act 2000; Accident Compensation Act 2001; Holidays Act 2003; and KiwiSaver Act 2006. Other Sources of Influence Acts of Parliament complement the ERA and establish minimum rights for employees, without however, constituting a single Labor Code. Common law practices influence labor relations, mainly derived from the British common law. Collective agreements and individual employment contracts also comprise obligations and rights binding on the parties and to this extent are enforceable under the ERA. Work Rules There is no statutory requirement to establish work rules; however, it is common for companies to establish internal work rules or employee handbooks that summarize the basic terms and conditions of employment in the workplace. 6
Types of Contract Fixed-Term Agreements Employers and employees can enter a fixed-term employment agreement; however, the employer must have a genuine reason, based on reasonable grounds, for limiting the period of employment, and must inform the employee in advance of the reasons for expiry of the agreement, the expected expiry date, and the way in which the contract will expire. Fixed-term agreements cannot be used under the following circumstances: To exclude or limit the rights of the employee under the ERA or Holidays Act; or To establish the suitability of the employee for permanent employment. Fixed-term contracts cannot be used as a trial period or to avoid headcount limitations. If the reason for employment still exists at the expiry of the stipulated period, employees may challenge the termination, arguing a reasonable expectation of work until the specified event occurs. Fixed-term agreements must be in writing. Indefinite-Term Contracts The basic terms and conditions of employment are governed by the employment agreement between the employer and the employee, including the terms implied by law. This agreement may be supplemented by other agreements and policies, and by applicable statutes. Where the agreement does not specify an end or expiry date, it will continue indefinitely until terminated in accordance with its terms. If the agreement does not contain a clause dealing with termination, the law implies a term that the contract may be terminated by giving reasonable notice, which will vary by employee. Like fixed-term agreements, indefinite-term agreements must be in writing. Formalities Both collective and individual employment agreements must be in writing. Both forms of agreement are the result of the employer making an offer that is accepted by the employee. The document is evidence of a legal relationship between the two parties, but there are also both statutory and implied terms in any agreement. Employers must keep copies of employment agreements or the terms and conditions covering every employee (including casual and temporary employees). Content and Form Any individual agreement must be in writing and include: Names of the employee and employer; A description of the work to be performed; An indication of where the employee will work; An indication of the working time arrangements; Wages or salary payable; A plain-language explanation of the procedures available for the resolution of employment relationship problems, including informing employees of the 90-day time frame within which they should raise personal grievances; and A provision on employment protection dealing with the rights and obligations of both parties in the case of corporate restructuring and transfer of undertakings. Language Employment contracts can be drafted in a foreign language, subject to mutual agreement; however, most contracts are drafted in English. In the event of conflicting versions of an employment contract, the English text prevails. 8
Active Employment Pay Overview There is a minimum wage provision for certain categories of employees in, while for younger workers and trainees lower figures apply. Base salary can be paid once or twice per month; however, some employers follow weekly pay schedules. There is no statutory requirement for providing fixed bonuses; neither is it common market practice. Performance-related bonuses are rather widespread across all categories of employees, apart from blue-collar workers. The imposition of the Fringe Benefit Tax (FBT) on employee benefits makes fringe benefits cost prohibitive and therefore uncommon. Minimum Wage The minimum wage rate regime was revised in 2013 to broaden utility of the rates for new workers and trainees. The rates are reviewed once a year and may or may not be adjusted as a result. There are three categories of minimum wages that apply to all workers age 16 or older. Workers under age 16 are not included in these categories and so are not statutorily entitled to the minimum wage; however, normal terms and conditions of employment apply. The Starting-Out minimum wage for employees age 16 to 19 with less than six months of continuous work experience or who are required to undergo at least 40 annual credits of industry training (i.e., programs registered with the National Qualifications Framework); The Training minimum wage for employees age 20 or older who are undergoing at least 60 annual credits of recognized industry training; and The Adult minimum wage, applicable to all workers age 16 or older who are not covered by the Training or Starting-Out minimum wage. The Adult minimum wage rate, effective as of April 1, 2015, is: NZD 14.75 per hour; NZD 180.00 per eight-hour day; and NZD 590.00 per 40-hour week. The minimum wage rate for individuals categorized as Starting-Out or Trainees is: NZD 11.80 per hour; NZD 94.40 per eight-hour day; and NZD 472.00 per 40-hour week. Wage Indexation There is no mandatory indexation of wages in the private sector. Bonuses There are no mandatory bonuses. Performance-related bonuses are common for all levels of staff above manual laborers. Incentives remain a standard part of executive packages, with almost all executives eligible for short-term incentives. They are also common for non-executive employees and are based generally on the achievement of individual objectives, with company performance determining the size of the pool to be distributed. Profit-Sharing There is no mandatory profit-sharing. Few companies have profit-sharing plans. 12
Allowances There are no mandatory allowances. Due to the imposition of a fringe benefits tax (FBT) on most employee perquisites and allowances, there is little incentive to provide such benefits. New rules on the tax treatment of allowances and accommodations for out-of-town secondments and extended periods of distance working took effect as of April 1, 2015, allowing the provision of certain related travel allowances which are not subject to FBT. Superannuation Benefits are provided by the Superannuation Fund, a sovereign wealth fund intended to prefund future superannuation costs by investing government contributions and returns on investment. Employers' monetary contributions to a registered superannuation scheme are deductible and are subject to employer superannuation contribution tax (ESCT). From April 2012, employer contributions to KiwiSaver are also subject to ESCT. Fringe Benefits Tax FBT is imposed on the value of any benefits paid to employees or their families due to their employment. The 49.25% levy on the provision of non-cash benefits such as health insurance has made fringe benefits cost prohibitive and therefore uncommon. It should also be noted that the provision of fringe benefits is subject to a Goods and Services Tax (GST), levied at 15%. Rather than use the single-rate FBT option, employers can avail themselves of an alternate rate calculation so that the benefit is taxed at the employee's marginal tax rate, but the tax benefit is generally limited to employees earning under NZD 70,000 per annum. Benefits provided to foreign transferees in their home country may also be subject to the FBT. Until 2011, salaried employees could take advantage of salary sacrifice arrangements to receive some benefits in lieu of cash compensation, but the advantages of salary sacrifice arrangements have largely been curtailed. The cost of providing an employee with a fringe benefit is deductible to the employer on the principle that it forms part of that employee's remuneration, albeit in a non-cash form. FBT is imposed on the taxable value of the fringe benefit, which is the value of the benefit less any contribution made by the employee toward the provision of the benefit. The rate of FBT can be: A single-rate option of 61% on all benefits provided to employees; or A single-rate option of 49% against the taxable value of the attributed benefits. FBT is a deductible expense. 13
Total Reward Package Pay Compensation typically consists of base salary, compulsory KiwiSaver contributions and variable pay. Pay periods vary considerably, with base salary payable in weekly, bi-weekly or monthly installments. Most companies adhere to the norm of 12 monthly payments. Fixed bonuses are not common practice. Car Benefits Company cars are a common benefit for top management, executives and sales staff. Provision of the benefit is subject to FBT, but can still offer some modest tax advantages for employees. Risk and Retirement Benefits Most companies do not offer supplemental retirement schemes or group health insurance benefits, due in part to the absence of tax incentives or significant advantages related to the cost of group retirement plans versus individual plans. Insured lump sum death benefits are commonly provided as a default option within supplemental retirement plans, where offered, or as a separate benefit. Perquisites Due to the imposition of the FBT, there is little incentive for employers to provide benefits and perquisites. Working Hours Overview Statutory Workweek The Minimum Wage Act establishes a statutory workweek of eight hours per day over a five-day, 40-hour workweek. However, this applies only to minimum wage work. Parties to an individual or collective employment agreement may, if they wish, negotiate a normal working week of longer than 40 hours, as long as the final terms and conditions are considered reasonable. Statutory Workday Daily or weekly normal working hours are not set by statute. Most employers observe a five-day workweek from Monday to Friday, from 8:00 a.m. to 5:00 p.m., with a lunch break of 30-60 minutes. Exceptions Some statutory provisions override an employment agreement in respect of working hours. For example, restrictions apply to commercial goods drivers, coal miners, bus drivers and aircraft pilots. Rest Periods Minimum statutory entitlements to rest and meal breaks depend on daily work hours as follows: One ten-minute rest break for four hours or less of work; One ten-minute rest break and one 30-minute meal break for four to six hours of work; and Two ten-minute rest breaks and one 30-minute meal break for six to eight hours of work. For daily work of more than eight hours, longer breaks apply. Employers must provide facilities and breaks for breastfeeding employees and rest and meal breaks for all employees in general. 14
Holidays And Statutory Leave Public Holidays The annual holiday provisions in the Holidays Act 2003 are deemed to be part of any employment agreement that is silent on the subject of leave. The Act does not prevent the employer providing the employee with enhanced entitlements, but it does set out the employee's minimum entitlements. The Holidays Act requires every employment agreement to provide for 11 public holidays each year in addition to annual leave. The days are: Day Date New Year's Day January 1-2 Waitangi Day February 6 Good Friday April 3* Easter Monday April 6* ANZAC Day April 25 Queen's Birthday Labor Day Provincial Anniversary Day June 1* (first Monday in June) October 26* (4 th Monday in October) Date varies per province Christmas Day December 25 Boxing Day December 26 * Variable dates Generally, each holiday is celebrated on the day it falls, although Christmas Day, Boxing Day, New Year's Day and January 2 are exceptions in that observation of the holiday can be transferred to the next working day if the holiday falls on a weekend. Historically, ANZAC and Waitangi Day were always observed on the dates on which they actually fell; however, beginning in 2014, observation of those holidays moved to the following Monday when they fall on a weekend. Employers and employees can agree to transfer observance of public holidays to another working day to meet the needs of the business or the individual needs of the employee. Such agreements should be made in writing. Annual Vacation Statutory Annual Leave Employees are entitled to at least four weeks of paid annual leave per year. Some individual or collective agreements may provide for one or more weeks of holidays on top of the statutory entitlement. Annual leave can be taken at any time, but employees must be given the opportunity to take at least two of the four weeks continuously if they wish to do so. Annual Leave Entitlement Employees are granted four weeks of paid annual leave after one year of employment. Two consecutive weeks should be taken within six months from the entitlement date and the rest within 12 months from the entitlement date. Employees may request annual leave pro-rata during their first year of service. In cases of non-full-time employment contracts, employers and employees may agree on how an employee's entitlement to four weeks' annual holidays is to be met, otherwise a Labor Inspector may determine the matter. In cases of irregular or changing work patterns over a 12-month period, employers and employees may agree to accrue annual leave on a basis of 4/52 for every hour worked. Employers may notify their employees at least 14 days in advance regarding the timing they could use their annual leave. Annual Leave Compensation During annual leave, employees are paid normal salary based on the greater of their ordinary weekly pay or their average weekly earnings over the past year, payable at the start of leave. In cases of irregular or changing work patterns over a 12-month period, when an agreement exists to accrue annual leave on a 4/52 basis for every hour worked, the annual holiday pay should be calculated by dividing the employee's annual gross total compensation by 52. 16
Vacation Accrual and Practice Employees have the right to request pay in lieu of unused annual leave unless their employer has an established policy against cashing out of leave. The maximum amount an employee can cash out of the minimum statutory entitlement is one week. Employees cannot be forced to accept cash in lieu of unused leave. Companies may offer longer annual leave based on years of service or special agreement included in individual or collective employment contracts. Carry Forward and Termination Once earned, the basic four-week vacation leave cannot be forfeited, and it will accumulate until such accrued vacation leave is used or employment is terminated. At termination of employment, employers are required to pay employees for annual leave not taken. Sick Leave Employees with at least six months of service are entitled to a minimum of five days of paid sick leave per annum. It can also be taken to care for the employee's spouse or dependents (child or parent). Unused sick leave is carried over to the next calendar year up to a maximum of 20 days' sick leave; however, by employer/employee agreement, the maximum number of accrued sick days can exceed 20 days. Employers can request proof of sickness or injury for any period of sick leave taken. In case of such a request, the cost to obtain the medical certificate should be covered by the employer. Maternity Leave Maternity leave is one of the several types of parental leave regulated by the Parental Leave and Employment Protection Act 1987. However, rather than regulate maternity, paternity, adoptive and parental leaves as separate and distinct entitlements, the Act considers them as component parts of a general parental leave entitlement, some elements of which are reserved for select claimants, such as maternity leave for female employees. Depending on the type of parental leave, it may be paid (i.e., pay replacement benefits are provided by social security) or unpaid. There is no statutory requirement for employers to provide paid maternity (or parental) leave, but some form of benefits may be payable by individual or collective agreement. To be eligible for the full array of parental leave benefits (i.e., maternity, extended maternity and paternity/partner leave), both parents must have at least 12 months of service with their employer prior to the start of leave. Part-time employees are also eligible, provided at least ten hours were worked on average per week. Employees with at least six months of service are entitled to maternity leave and special leave benefits, such as half of the paternity/partner leave benefit. They are ineligible for extended maternity leave. Entitlement to paid parental leave (i.e., maternity leave) generally rests with the mother, but she can transfer up to 16 weeks of maternity leave as well as extended maternity leave to the father or partner (who is also subject to the 12-month service requirement). The total leave entitlement and ability to transfer or accept transference of leave is reduced or eliminated in situations where one parent does not meet the 12-month service requirement. Employees with less than six months of service are not entitled to benefits under the Act. Maternity leave is one continuous period of up to 16 weeks (14 weeks prior to April 1, 2015), out of which at least eight weeks should be used after the delivery or adoption date. This means that maternity leave may potentially be longer than 16 weeks if the child is born later than the expected delivery date (EDD) and the employee began her leave several weeks before the EDD. The employee should notify the employer at least three months prior to the EDD. A medical certificate confirming the pregnancy and the EDD should also be submitted. Lack of proper notification should not prevent the employer from approving leave. In case pregnant employees are not capable of performing their work safely or adequately, the employer may transfer them to more suitable positions or request that they begin their maternity leave earlier, at the employer's convenience. (This can be earlier than six weeks prior to the EDD.) In general, employees are entitled to return to their prior position after parental leave ends. There are a few exceptions to the requirement to keep the position open, such as collective redundancies or for employees in key positions that cannot be covered by temporary replacements. In either case, the decision not to keep the position open may be challenged by the employee. The service of employees returning to their positions after a period of parental leave is regarded as being unbroken as far as their rights and benefits are concerned. The time also counts with respect to superannuation (KiwiSaver), provided the employee has continued to make any necessary contributions. 17
Termination of Employment Types of Termination Overview In general, in there are no statutory requirements for individual dismissals. Employers are required to adhere to the requirements of procedural fairness, reasonableness and the principles of natural justice in order for a dismissal to be justified. Court decisions may evaluate these principles on a case-by-case basis. Grounds for Termination With Notice Termination of employment for reasons of poor performance or behavior is subject to general standards for just cause. Employers should provide adequate warning of the consequences of the continued unsatisfactory performance and counseling on requirements and expectations. Under specific circumstances, employers may also be required to provide their employees with development opportunities (such as training, etc.). Company policies may outline the warning procedure, which in such cases should be strictly followed. In case of termination due to poor performance without prior adequate warning, unjustified dismissal may be evinced and reinstatement may be ordered or compensation in lieu of lost wages can be required. Termination of an employment agreement may also occur for the following reasons: Death of either party; Dissolution of the partnership (if the employer is a partnership); Disposal of the employer's business; Expiration of the agreement (in the case of a fixed-term agreement); or Breach of agreement by one of the parties. The fact that an agreement allows for termination by the employer does not negate the need to comply with relevant legislation and common law requirements. Without Notice Summary dismissal or termination without notice may be justified in certain circumstances, such as: Serious misconduct; Gross negligence; or Any other conduct that destroys or significantly undermines the employer's trust and confidence in their employees. Serious misconduct is always a matter of degree, but usually it will involve conduct that deeply impairs the basic confidence or trust that is essential in an employment relationship. Summary dismissal has been held justifiable in cases involving dishonesty, violence, incapacity to work due to intoxication, and breach of confidence. Procedural fairness is a requirement to avoid unjustified termination. For termination due to serious misconduct, no notice or pay in lieu of notice applies. Termination without notice in cases where the misconduct is not serious may be considered a breach of the employment contract, due to the failure to provide the requisite warning or period of notice of termination. 27
Termination during the Probationary or Trial Period Dismissals during probation must be carried out in a procedurally fair manner. This may include providing feedback to the employees on their performance and areas for development, and allowing adequate time to improve. Employers should notify their employees whether their contract will be extended or will cease during or at the end of the trial period. Employees cannot claim unjustified dismissal during a trial period; however, claims relating to harassment, unjustified disadvantage or discrimination will be taken into consideration. The required period of notice during probationary and trial employment will depend on the terms of the individual employment agreement, collective bargaining agreement and/or internal work rules. Termination of Fixed-Term Contracts Fixed-term agreements automatically terminate at the end of their term. Early termination may result in a claim for payment of salary and other entitlements otherwise payable to the end of the term. In determining whether the agreement is a genuine fixed-term agreement, the courts will look at whether there is a genuine reason based on reasonable grounds for the fixed-term agreement. "Genuine reason" is not defined in the Employment Relations Act (ERA), but the Act does state that the following reasons are not genuine: Excluding or limiting an employee's rights under the Act; Using a fixed term to determine the suitability of an employee for permanent employment; and Excluding or limiting an employee's rights under the Holidays Act. The contract's termination date, as well as the reason for and manner of termination, should be stated in the contract, which should be in writing. Caution should be exercised when making or extending fixed-term agreements, as a court may construe that it was the intention of the parties to have ongoing employment, rather than employment for a fixed period of time. Employees on fixed-term agreements must be paid the balance of their entitlements for the full term of their employment if they are dismissed before the end of the fixed term for a reason other than serious or willful misconduct. Resignation There is no statutory requirement stipulating the manner or timing of an employee's resignation. Notice requirements for resignation are typically established under the terms of the individual employment contract. Protected Categories The ERA and other statutes do not include any blanket protections from dismissal for certain categories of employees. However, the law does provide various protections against termination of employment related to the employees' assertion of their rights. For example, the ERA's provisions on freedom of association are intended to protect employees from dismissal due to their union activities or membership. The provisions generally cover the following matters: Employees acting in their capacity as union members, delegates or officers; Participation or non-participation in industrial action; Entitlement to the benefits of an agreement; and Giving information to authorized inspecting officers. The law also protects employees from dismissal for failing to join a union in the workplace. Some low-paid employees in certain industries are entitled to special employment protections in the event of a transfer of undertaking. (See Organizational Change below for more details.) 28
Unfair Dismissals Employees can challenge termination on the grounds of lack of justification or unfair procedure, and may pursue claims for reinstatement, reimbursement of lost salary and benefits, and compensation. While, in theory, employees can be dismissed on grounds of performance, attendance, compatibility, loyalty or conduct, in practice, any dismissal must be justifiable and be carried out in a procedurally fair manner. The ERA sets out a test for justifying employers' actions, including dismissals. The test requires that employers' actions must reflect what a fair and reasonable employer could have done in all circumstances. For example, employees must be warned that continued poor performance may jeopardize their job and be given adequate training and sufficient time and opportunity to improve before a dismissal is considered justified. If individual or collective employment agreements contain disciplinary and dismissal procedures, then such procedures should be followed, otherwise any dismissal may be considered procedurally unfair. In general terms, warnings are considered important to assure fairness. Warnings are to contain details of the behavior or performance that is defective and must be improved, and statements that further disciplinary actions, including dismissal, may result if the behavior/performance does not improve. Employees must be given sufficient opportunity to improve. The concept of fairness also requires employers to fully investigate any complaints, consider any other relevant factors, and give employees the opportunity to provide an explanation. In case of dismissal, employers should inform the dismissed employees of the reasons for termination. Employees may request a written statement of the reasons for dismissal, and they may submit a claim against the dismissal within 90 days. Information and Consultation The ERA and common law contain a positive obligation to consult in relation to a proposed decision that will, or is likely to, have an adverse effect on an employee's continuation of employment (i.e., termination, redundancies). However, there is no statutory requirement for employers to consult with the government or employee representatives before termination or to get permission. Notice Labor law does not stipulate a minimum notice period requirement for employers or employees in terminating the employment relationship. The subject is normally addressed by individual employment contracts and/or collective agreements/company work rules. In the absence of an agreement otherwise, notice can be given in writing or orally, although written notice is advisable. The period of notice is open to negotiation at the time an agreement is drawn up, but is generally linked to the importance of the employee's position, seniority, length of service and the pay period. Where an agreement does not specify the length of notice, custom and practice within the organization can be used in conjunction with the previous criteria to establish a reasonable period of notice. While a shop-floor worker would generally be covered by one week's notice, a senior employee could be required to give (and be entitled to receive) between three and nine months' notice. A period of notice is exclusive of any leave entitlement earned by the employee but not yet taken. Termination Indemnity/Severance Payment In cases of dismissals for just cause, employers are generally not liable for any compensatory payments. Employees are entitled to any unpaid wages or salary, plus the balance of accrued holiday pay. There is no statutory provision for termination indemnities or redundancy compensation, but the issue may be addressed by individual or collective agreement. In general, redundancy compensation tends to be based on the formula: four weeks' salary for the first year of employment plus two weeks' salary for each additional year, but this is by no means a hard-and-fast rule. 29