A Practical Guide: Employment Contract NZ for Businesses

Getting your employment contracts right from day one is one of the most important things you can do to protect your business. When you’re hiring staff, it’s crucial to understand the essentials of an employment contract NZ businesses rely on. While a verbal agreement might feel quicker in the moment, it opens you up to huge risks. A well-written contract is far more than a legal formality; it’s the bedrock of a strong, clear, and professional working relationship.

Why an Ironclad Employment Contract is Non-Negotiable

Two hands shaking over a signed contract document, pen, and an Australian flag, symbolizing a business agreement.

Think of an employment agreement as the rulebook for your relationship with a team member. It’s a vital tool that spells out roles, responsibilities, and expectations, helping you sidestep costly misunderstandings and disputes down the track.

Here in New Zealand, having a written agreement for every single employee isn’t just good practice—it’s a legal requirement under the Employment Relations Act 2000.

The Dangers of a Handshake Deal

Let’s be blunt: relying on a verbal agreement leaves your business incredibly exposed. If a disagreement pops up about pay, hours, or duties, you’re stuck in a messy “he said, she said” situation. Without a signed document, it’s nearly impossible to prove what was actually agreed upon, and employers often come off second-best in a formal dispute.

On top of that, a Labour Inspector can hit you with a fine of $1,000 per employee for failing to provide a written contract. The potential financial and reputational damage just isn’t worth the risk.

Setting Clear Expectations From the Start

A solid employment contract does more than just tick the legal boxes. It builds a foundation of trust and clarity that works for everyone. For your new hire, it offers security and a clear picture of their role. For you, the business owner, it protects your interests and sets professional boundaries from the get-go.

A good contract helps you:

Prevent Misunderstandings: By clearly outlining job duties, work hours, and pay, there’s no room for confusion.
Protect Business Assets: You can include essential clauses on confidentiality and intellectual property to keep sensitive information safe.
Simplify Dispute Resolution: Having a clear, agreed-upon process for handling problems is a mandatory part of any NZ contract.

An employment agreement isn’t just about compliance; it’s about creating a stable and predictable work environment where both parties know exactly where they stand.

This is especially crucial given that individual agreements are the norm here. For example, recent data shows that around 82% of employees in the 25–34 age group are on individual contracts. This highlights just how important it is for every business owner to get this document right, every single time.

To help you nail the basics, here’s a quick overview of the non-negotiables for any NZ employment agreement.

Contract Essentials at a Glance

Required Element	Why It’s Critical	Governing Act
Names of the Parties	Clearly identifies the employer and employee.	Employment Relations Act 2000
Position & Duties	Defines the employee’s role and key responsibilities to avoid scope creep.	Employment Relations Act 2000
Place of Work	Specifies the location(s) where the work will be performed.	Employment Relations Act 2000
Hours of Work	Sets clear expectations for agreed-upon work hours and days.	Employment Relations Act 2000
Wages or Salary	Details the pay rate and how it will be paid, ensuring compliance with minimum wage laws.	Minimum Wage Act 1983
Leave Entitlements	Outlines all leave (annual, sick, bereavement) as required by law.	Holidays Act 2003
Dispute Resolution Process	A mandatory clause explaining the plain-language steps for resolving issues.	Employment Relations Act 2000

Getting these details right is fundamental. Mishandling pay or entitlements can lead to serious consequences, and as we explain in our article, wage theft is now a criminal offence in New Zealand.

If the legal jargon and compliance requirements feel a bit much, you’re not alone. For affordable, down-to-earth support, talk to the chartered accountants at Business Like NZ Ltd. We’re here to help Auckland businesses and property investors start every employment relationship on a strong, compliant footing.

Getting the Foundations Right: Core Legal Requirements

So, you’ve found the right person for the job and shaken hands on an offer. What’s next? It’s time to put that verbal agreement into a solid, written document. In New Zealand, an employment contract isn’t just a formality; it’s a legal necessity, and getting the basics right from the start is crucial for a healthy working relationship.

Think of the Employment Relations Act 2000 as your rulebook. It sets out the non-negotiable building blocks for every employment agreement. Nailing these core elements ensures your contract is compliant, clear, and fair for everyone involved.

Who Is This Agreement Actually Between?

This sounds almost too simple, but you’d be surprised how often it’s done incorrectly. The contract must state the full, legal names of both the employer and the employee.

For your business: Use your registered company name, like “Kiwi Construction Ltd,” not just your trading name, “Kiwi Builders.”
For your employee: Use their full legal name, the one that’s on their passport or birth certificate.

Getting this detail right from the get-go avoids any confusion about who is bound by the agreement.

What’s the Job and Where Is It?

Setting clear expectations is key. The contract needs a solid description of the work your new employee will be doing. You don’t have to list every single task for the next five years, but you do need to capture the essence of the role and its main responsibilities.

For example, instead of a vague title like “Café Assistant,” be more specific:

“The employee’s main duties will include preparing and serving hot and cold beverages, taking customer orders, operating the till, and helping maintain a clean and tidy service area.”

You also have to state the primary place of work. If it’s a specific office, shop, or workshop, pop the full address in. If the role requires travel or working across different sites, you’ll need to outline that too.

Sorting Out the Hours and Pay

Money and hours are the two areas where misunderstandings most often crop up, so your contract needs to be watertight here.

By law, you must include:

Agreed Hours of Work: Be specific. Is it 9:00 am to 5:00 pm, Monday to Friday? Or will they be on a variable roster? Spell it out.
Pay Rate: Clearly state their wage or salary. For example, “$25.00 per hour” or “$60,000 per year.” This figure must, of course, be at or above the current minimum wage.
How They Get Paid: Mention the pay cycle, such as “fortnightly,” and the method, usually “by direct credit into the employee’s nominated bank account.”

A word of caution: Vague phrases like “hours as required” are a recipe for disaster. Be as precise as you can to avoid future arguments over expectations and overtime.

What Happens When Things Go Wrong?

This is a big one. Your contract absolutely must include a plain-English explanation of how you’ll handle any employment relationship problems. This isn’t just legal fluff; it’s a required roadmap for resolving disagreements.

You need to state that the employee has 90 days to raise a personal grievance (or 12 months for issues related to sexual harassment). You should also briefly outline the process, which usually starts with a direct conversation and can move to mediation if needed.

For a bit more context on your legal duties, our guide on employment law basics in NZ is a great place to start. And if you want a broader overview, this guide to complying with employment laws is also incredibly helpful.

Building a contract on these legal foundations doesn’t need to be daunting. By addressing these points clearly and accurately, you’re creating a document that protects both your business and your team.

If you’re an Auckland business or property investor feeling overwhelmed, get in touch with Business Like NZ Ltd. We’re your local team of affordable, down-to-earth chartered accountants ready to give you the practical support you need to get your employment structures sorted.

The Clauses That Actually Protect Your Business

A confidential file folder with documents, a pen, and a padlock, symbolizing secure information.

Once you’ve nailed the legal must-haves, it’s time to add the clauses that really safeguard your business. Think of the legal basics as the skeleton of your contract; these clauses are the muscle.

They go beyond minimum entitlements to set crystal-clear expectations around performance, behaviour, and how your valuable business information is handled. These aren’t just bits of legal jargon to copy and paste—they are practical tools that protect the business you’ve worked so hard to build.

Two of the most important, and easily confused, are trial periods and probationary periods. They sound similar, but getting them wrong can land you in hot water.

Trial Periods vs. Probationary Periods

Getting your head around the difference between a 90-day trial period and a probationary period is absolutely critical for Kiwi businesses.

A trial period is a powerful option, but it comes with a big string attached: it’s only available if you have 19 or fewer employees. For it to be legally binding, it must be included in a written employment agreement that the employee signs before they start work. Not on their first day, but before.

If you tick those boxes correctly, you can dismiss an employee within those first 90 days without them being able to take a personal grievance for unfair dismissal. You still have to give them their contractual notice, of course, but it removes a significant legal risk.

Probationary periods, on the other hand, can be used by businesses of any size. This clause simply sets a time at the start of the job for you both to assess if it’s a good fit.

The key difference? If you decide to dismiss someone on a probationary period, you must follow a fair and proper process. That means giving them clear feedback, support, training, and a real chance to improve before making a final decision.

Practical example: A trial period lets a small café owner dismiss a new barista within 90 days if they simply aren’t a good fit, provided the contract was signed correctly beforehand. A probationary period requires the owner to provide feedback, offer extra training, and document performance issues before making a dismissal decision.

Protecting Your Confidential Information

Ever had that nightmare where a star employee walks out and takes your client list straight to a competitor? A solid confidentiality clause is your first line of defence against that exact scenario.

This clause makes it clear that sensitive business information—the stuff that gives you a competitive edge—can’t be shared or used for personal gain, both during and after their time with you.

A good clause should be specific about what you consider ‘confidential information’. It’s more than just top-secret formulas. It includes things like:

Client lists and contact databases
Pricing strategies and supplier deals
Your financials and business plans
Internal processes or unique marketing campaigns

Real-world example: We worked with a small digital marketing agency in Auckland whose contract had a well-defined confidentiality clause. When an account manager left to go freelancing, that clause legally stopped them from poaching the agency’s key clients for six months. It bought the agency vital time to hire a replacement and protect its revenue.

Safeguarding Your Intellectual Property

If your staff create anything as part of their job, you need an intellectual property (IP) clause. This could be anything from software code and website copy to graphic designs or training materials.

This clause states that any work an employee produces while working for you belongs to the business, not to them personally. It sounds obvious, but without it, you could face a messy dispute where a former employee claims they own the logo they designed or the manual they wrote. An IP clause removes all doubt.

Setting Boundaries With a Conflict of Interest Clause

This one is all about making sure your employees are always acting in the best interests of your business. A conflict of interest clause prevents situations where an employee’s personal interests or side-gigs could clash with their responsibilities to you.

For example, this clause would stop an employee from:

Running a side-hustle that directly competes with you.
Giving a contract to a supplier just because it’s owned by their cousin.
Accepting expensive gifts from a client in return for a better deal.

Of course, a good contract is only one part of the puzzle. It’s also vital to understand the correct way to handle things when the employment relationship ends. Having a clear employee termination process checklist is just as crucial.

These clauses aren’t about creating a culture of mistrust. They’re about setting clear, professional boundaries that protect your business, your team, and your hard work.

If you’re an Auckland business owner or property investor struggling to get your head around this, it can feel overwhelming. At Business Like NZ Ltd, we’re affordable, down-to-earth chartered accountants who specialise in making this stuff simple for local businesses just like yours.

Choosing the Right Type of Employment Agreement

Not every role you create will fit the same mould, and picking the wrong type of employment contract nz can cause some serious headaches down the track. Deciding between a permanent, fixed-term, or casual agreement isn’t just an admin task—it’s a legal necessity that protects both you and your new hire.

Get this part wrong, and you could find yourself in a tricky spot. You might have a casual employee who is legally deemed permanent and owed a heap of back-paid leave, or a fixed-term contract that gets challenged as an unfair dismissal. It pays to get it right from day one.

The Bedrock of Employment: Permanent Contracts

For most Kiwi businesses, permanent agreements are the go-to and generally the most straightforward option. These contracts don’t have a set end date; they simply continue until either you or the employee decides to end things by giving the required notice.

Permanent roles can be either:

Full-time: This is usually somewhere between 30 to 40 hours a week, but you should always spell out the exact number in the contract.
Part-time: Just means fewer hours than a full-time role. The crucial thing here is that the hours are regular and predictable, even if they aren’t your typical 9-to-5.

Permanent employment is the standard in New Zealand. You can see this reflected even in the public sector, which has made a big push towards permanency. By mid-2025, a massive 95.4% of Public Service employees were on permanent contracts, with fixed-term roles making up a tiny 4.6%. You can dig into these trends and conditions over at the Public Service Commission.

The Tricky Nature of Fixed-Term Contracts

A fixed-term contract is exactly what it sounds like: it has a specific end date, or it finishes up when a particular task is completed. This is where a lot of business owners get tripped up. You can’t just use a fixed-term agreement to “try someone out” or to sidestep the security of a permanent position.

You must have a genuine, legally sound reason for the role being temporary.

A few common, valid reasons include:

Covering for an employee who’s away on parental leave.
Hiring someone for a specific, one-off project (like building a new website).
Managing a seasonal rush, like bringing on extra retail staff for the Christmas period.

Your reason for the fixed term must be clearly stated in the employment agreement, along with exactly how and when it will end. If you don’t, the agreement could be legally seen as permanent from the get-go.

Casual Agreements for True Flexibility

Casual employment is designed for those truly ad-hoc situations where work is irregular and unpredictable. A genuine casual employee has no guaranteed hours, no ongoing expectation of work, and can turn down a shift without any repercussions.

Think of a student you might call in to cover a last-minute sick day at your café. The moment you start giving them a regular Tuesday and Thursday slot every week, they stop being casual. Legally, they could be considered a permanent part-timer, which means they’re entitled to all the associated leave benefits.

The Critical Line: Employee vs. Independent Contractor

One of the biggest distinctions you’ll have to make is whether you’re hiring an employee or engaging an independent contractor. This isn’t just about what title you give them; it’s about the fundamental nature of your working relationship.

Getting this wrong by misclassifying an employee as a contractor—sometimes called a “sham contracting arrangement”—can land you in hot water. You could be facing significant penalties, including having to back-pay PAYE, KiwiSaver contributions, and all their leave entitlements.

The courts look at the “real nature” of the relationship, not just what the contract says. They’ll weigh up a whole range of factors to figure out who really has control, how integrated the person is in your business, and who carries the financial risk. This has serious tax implications, too. For a detailed breakdown, check out our guide on understanding contractor tax rates.

To help you get a clearer picture, here’s a quick comparison of the key differences.

Employee vs Independent Contractor Key Differences

Factor	Employee	Independent Contractor
Control	The employer directs how, where, and when the work is done.	The contractor has a high degree of control over their own work.
Tools & Equipment	The employer provides the necessary tools and equipment.	The contractor typically provides and maintains their own tools.
Financial Risk	The employee bears no financial risk for the business.	The contractor bears the risk of making a profit or a loss.
Integration	The employee is an integral part of the business structure.	The contractor operates their own independent business.
Payment	Receives a regular wage or salary with tax (PAYE) deducted.	Invoices for their services and manages their own tax and ACC.
Leave	Is entitled to paid annual, sick, and bereavement leave.	Is not entitled to any paid leave from the client.

Ultimately, choosing the right agreement type is fundamental to protecting your business. If you’re an Auckland business owner or property investor feeling unsure about which contract fits your situation, don’t guess. The team at Business Like NZ Ltd offers affordable, down-to-earth advice to help you get it right from the start.

Where It Can All Go Wrong: Common Contract Mistakes

Even with the best of intentions, it’s incredibly easy to trip up when you’re putting together an employment contract nz. These aren’t just little administrative slip-ups, either. A simple mistake can easily spiral into a personal grievance claim, hefty fines, and a lot of stress you just don’t need.

Taking the time to get it right from the very beginning will save you a world of pain down the track. Rushing the process or grabbing a dodgy template from the internet is a classic recipe for disaster, turning a positive new hire into a potential legal headache.

The Late Contract: A Costly Delay

One of the most common—and damaging—mistakes I see is business owners handing over the contract after the new person has already started. The law is black and white on this: the employment relationship officially kicks off the second they accept your job offer, not on their first day.

Sure, a verbal agreement is still technically binding, but if you don’t have that signed piece of paper in hand before they start, you’ve already lost some crucial protections.

Here’s a practical scenario:
Picture this: a small construction firm in Auckland hires a new builder. The owner’s flat-out busy and only gets around to handing over the contract an hour into the employee’s first shift. The contract includes a 90-day trial period. A month later, it’s clear the new guy isn’t the right fit, so the owner lets him go, thinking the trial period gives them a clean out.

Big mistake. Because the contract was signed after work had already started, that 90-day trial period is completely invalid. The builder is now well within his rights to file a personal grievance for unfair dismissal, leaving the business owner exposed to a messy and potentially expensive claim.

The Dangers of “One-Size-Fits-All” Templates

It’s tempting to grab a free template off a random website to save a few bucks, but it’s a massive gamble. New Zealand’s employment law is unique, and a contract designed for Australia, the US, or the UK just won’t cut it here.

These generic documents are often missing clauses that are legally required under our Employment Relations Act. Worse, they might include terms that are totally unenforceable in NZ. You could be missing crucial details on dispute resolution or what happens if the business is sold, leaving you non-compliant without even knowing it.

Getting the paperwork right from day one isn’t just about ticking boxes. It’s about building a fair, legal, and crystal-clear foundation for your relationship with your employee.

Tough economic times can make businesses rush these things. With indicators pointing to a slight job contraction and rising unemployment through 2024–2025, some employers might cut corners. Stats NZ reported 2.33 million filled jobs in September 2025, a small dip of 0.5% from the year before. In this sort of climate, using a flawed contract only magnifies your risk. You can read more about recent employment indicators and see how they’re impacting businesses.

Changing the Rules Mid-Game

Think of an employment agreement as a binding deal—not a document you can just tweak whenever you feel like it. Once it’s signed, you can’t unilaterally change fundamental terms like pay, hours, or work location without your employee’s genuine agreement.

Trying to force a change is a breach of good faith. If you need to make an adjustment, you have to follow a proper process:

Propose the change and explain the solid business reason behind it.
Consult with your employee. This means genuinely listening to their feedback, not just telling them what’s happening.
Reach an agreement together and document it in writing.

If you just go ahead and cut someone’s hours without their consent, for example, you could be facing a constructive dismissal claim. That’s where an employee argues that your actions effectively forced them to resign.

Dodging these common pitfalls doesn’t mean you need to be a lawyer—it just takes a bit of care and attention to detail. If you’re an Auckland business owner or property investor who wants to be sure your contracts are rock-solid, get in touch with Business Like NZ Ltd. We’re the affordable, down-to-earth chartered accountants that provide practical support to help you get these foundations right.

Your Final Checklist for a Compliant Contract

Before you hand over that freshly printed employment contract nz, it’s worth taking a moment for one last check. I’ve seen simple oversights at this stage cause real headaches down the line, so getting these final steps right is about more than just ticking boxes – it’s about starting your new working relationship on solid ground.

A smooth onboarding process is just as important as the contract itself. It’s your first real chance to show your new hire they’ve made the right choice, turning them from a promising candidate into a valued part of the team.

Before They Sign on the Dotted Line

Here are a few things to cross off your list before you send the agreement over:

Confirm the Employment Type: Is it definitely a permanent role? Or does it genuinely meet the strict criteria for a fixed-term or casual agreement? Make sure the contract matches the reality of the job.
Draft All Essential Clauses: Run your eyes over it one last time. Are all the legal must-haves in there? What about the clauses that protect your business, like confidentiality or intellectual property?
Get a Second Opinion: Ask an advisor or even another experienced business owner to glance over it. A fresh pair of eyes can spot something you might have missed, potentially saving you a lot of trouble.
Give Them Time: This is a big one. Always send the contract with plenty of time for the candidate to read it thoroughly and seek their own advice. Rushing this step can create a feeling of pressure and mistrust from the get-go.

Once the Ink Is Dry: Nailing the Onboarding

With the signed contract back in your hands, the next step is getting them seamlessly into your systems. This is where the admin has to be spot on.

Make sure their payroll details are entered correctly, their KiwiSaver is sorted (whether they’re enrolling or opting out), and you have their right tax code. The last thing you want is a pay-related mistake in their first week; it’s one of the quickest ways to sour a new working relationship.

Getting your employment contracts right is fundamental to running a successful business. If you’re looking for affordable, down-to-earth advice that protects you and your team, have a chat with us. As chartered accountants, Business Like NZ Ltd supports Auckland businesses and property investors with practical guidance that actually works.

Got Questions? We’ve Got Answers

Getting your head around employment contracts in NZ can feel a bit like navigating a maze. It’s natural to have questions, and chances are, other business owners have asked the same thing. Here are a few of the most common queries we get from Auckland businesses.

What Happens If I Don’t Have a Written Employment Contract?

This is a big one. While a handshake deal or verbal agreement is technically binding in New Zealand, you’re skating on thin ice without a written contract. For starters, not providing one is a direct breach of the Employment Relations Act 2000, which can land you with a penalty from a Labour Inspector.

But the real risk comes when there’s a disagreement. Without a signed document to refer to, proving what was actually agreed upon becomes your word against theirs. In these disputes, the Employment Relations Authority often leans in favour of the employee, simply because the employer failed to meet their basic legal obligation.

Can I Change an Employment Contract After It’s Signed?

Simply put, no—at least not on your own. An employment contract is a legally binding agreement, and you can’t just unilaterally decide to change the rules.

Any proposed changes need to be discussed openly and in good faith with your employee. For any amendment to be legally sound, both of you must agree to it. It’s crucial to then put the new terms in writing and have both parties sign off. Trying to force a change is a fast track to a personal grievance claim.

How Does the 90-Day Trial Period Actually Work?

The 90-day trial period is a useful tool, but it comes with some very strict rules. First off, it’s only available for businesses with 19 or fewer employees.

For the trial period to be valid, two things absolutely must happen:

It must be included as a clause in the written employment agreement.
The employee must sign that agreement before they start their first day of work.

If you tick both those boxes, you can dismiss an employee within that 90-day window, and they can’t raise a personal grievance for unfair dismissal. That said, you still need to act in good faith and follow a fair process, including giving them the correct notice period as outlined in their contract. It’s not a get-out-of-jail-free card for treating people poorly.

Getting your employment contracts right from the start is one of the smartest things you can do to protect your business. For affordable, down-to-earth support, have a chat with the team at Business Like NZ Ltd. We’re chartered accountants who help Auckland businesses and property investors with practical guidance, ensuring every new hire begins on a strong and compliant footing. You can find us at https://businesslike.sproutonline.nz.