Hiring your first employee (or growing your team) is a big milestone. It’s also one of those moments where the “business side” and the “legal side” meet very quickly.
An employment relationship in New Zealand isn’t just about paying wages for work. It’s built on clear written terms, fair processes, and an ongoing duty to deal with each other honestly and constructively. That’s where employment agreements and good faith bargaining come in.
This guide is updated for current New Zealand expectations and the practical realities of modern workplaces (including flexible work and digital communications). We’ll walk you through what employment agreements should cover, what “good faith” really means, and how to protect your business from day one while still being a great employer.
What Is An Employment Agreement In New Zealand (And Why Does It Matter)?
An employment agreement is the contract between you (the employer) and your employee. In New Zealand, employment relationships are governed primarily by the Employment Relations Act 2000, and having a written agreement isn’t just “nice to have” - it’s a core part of running a compliant workplace.
At a practical level, a good employment agreement helps you:
- Set expectations clearly (hours, duties, pay, reporting lines, policies, and performance standards).
- Reduce misunderstandings that can turn into disputes.
- Support good processes if something goes wrong (performance concerns, restructuring, dismissal, or resignation).
- Protect your confidential information, customer relationships, and business systems.
If you don’t have the right agreement in place (or you use something generic that doesn’t match how your workplace actually runs), you can end up with real uncertainty around things like overtime, availability, job duties, and termination rights.
And when a dispute happens, the first thing everyone looks at is the written agreement - so it’s worth getting it right upfront with an Employment Contract that reflects your role, your industry, and your day-to-day reality.
What Must Be Included In A NZ Employment Agreement?
Employment agreements can be short, but they shouldn’t be vague. Some terms are required or strongly expected in most situations, and you also want to make sure the agreement is actually usable when you need it.
Common “Core” Terms
Most New Zealand employment agreements include:
- Employer and employee details (legal names and contact details).
- Job title and duties (and where the work will be performed).
- Hours of work (including any flexibility, roster arrangements, and how changes will be handled).
- Pay and pay cycle (wage/salary, commission/bonus arrangements if any, and what is included/excluded).
- Leave entitlements (annual holidays, sick leave, bereavement leave, public holidays, parental leave - noting that minimums come from the Holidays Act 2003 and other legislation).
- Trial period or probation (if used) and how it will operate (this needs to be handled carefully and isn’t appropriate for every employer or role).
- Termination clause (notice periods, payment in lieu where relevant, and obligations on exit).
- Dispute resolution steps (often referencing internal steps first, then mediation, then the Employment Relations Authority if required).
Workplace Policies And How They Interact With The Contract
Many businesses use a staff handbook or workplace policies to cover the “how we do things here” details (like IT use, social media, bullying and harassment, leave requests, and expenses).
The agreement should clearly say which policies apply and how they can be updated over time. This is particularly important for privacy and monitoring issues (for example, using work devices, email systems, or CCTV).
If you want something more comprehensive than a single agreement, an Staff Handbook can help you set consistent rules across your team - and keep your contracts leaner and easier to manage.
Confidentiality, Intellectual Property, And Restraints
If your employee will have access to sensitive information (client lists, pricing, supplier terms, internal processes, product roadmaps), you’ll usually want confidentiality obligations. If they’re creating content, code, designs, systems, or other “work product”, you’ll also want clear intellectual property ownership wording.
Sometimes employers also include restraints (like non-solicitation or non-compete clauses). These are not automatically enforceable just because they’re written down - they need to be reasonable and tailored to the role and legitimate business interests.
Because this area is so fact-specific, it’s often worth getting advice rather than relying on templates or “standard” clauses.
Good Faith Bargaining: What Does “Good Faith” Actually Mean?
Good faith is a central theme in New Zealand employment law. In simple terms, it means employers and employees must deal with each other honestly, openly, and constructively - and not mislead each other or undermine the employment relationship.
Good faith shows up most clearly in two areas:
- Bargaining and negotiations (when you’re negotiating a new agreement, changes to terms, or collective bargaining).
- Ongoing employment relationship conduct (like consultation, handling concerns, investigating issues, and restructuring).
Good Faith When Offering Or Negotiating An Agreement
When you offer a new employee an agreement, good faith means things like:
- Giving them a real opportunity to review the agreement and ask questions.
- Letting them get independent advice (and not rushing them unreasonably).
- Not making misleading statements about pay, job security, hours, or “what the role really involves”.
- Being upfront about anything important that could affect their decision (for example, if the role is genuinely fixed-term and why).
If you’re changing existing terms (for example, hours, location, duties, or commission structure), good faith typically means you can’t simply announce the change and expect compliance. Usually, you’ll need a process that involves consultation and genuine consideration of the employee’s feedback.
Good Faith Is Not The Same As Agreeing With Each Other
A common misconception is that good faith means you must always reach agreement. You don’t.
You can still:
- Say no to a proposed change.
- Reject a counter-offer.
- Run your business in a way that’s commercially realistic.
But you should do it in a way that is transparent, procedurally fair, and respectful - with the relevant information shared where appropriate.
Do You Need An Individual Or Collective Employment Agreement?
Most small businesses use individual employment agreements, particularly when hiring a small number of staff across different roles.
A collective agreement is negotiated between an employer and a union on behalf of employees. If your workplace involves unionised staff or bargaining for a collective, the good faith obligations can become more structured and more formal.
Even if you’re not bargaining collectively, good faith still matters in individual negotiations and in how you manage people day to day.
Fixed-Term Agreements And Trial Periods (Handled Carefully)
Two areas that often cause confusion are fixed-term agreements and trial periods.
- Fixed-term employment can’t be used just because it’s convenient. There generally needs to be a genuine reason based on reasonable grounds (for example, a project with a clear end date or covering parental leave). If you’re using a longer fixed-term arrangement, it’s worth reading up on Fixed Term Contracts so you’re clear on the risks.
- Trial periods can be useful, but they are technical and mistakes can be costly. You’ll want the wording and process right from the start, including timing and when the agreement is signed.
If you’re unsure whether a fixed-term or trial period is appropriate, getting tailored advice early is usually far cheaper than untangling a dispute later.
Common Employment Agreement Mistakes (And How To Avoid Them)
Most employment issues don’t start with “bad intentions”. They start with unclear documents or rushed conversations - and then expectations drift over time.
Here are some common pitfalls we see for New Zealand employers.
1. Using A Template That Doesn’t Match Your Workplace
Templates can be tempting, especially when you’re busy and trying to keep costs down. The problem is that they’re usually built for a generic business, not your business.
For example, if your template says “9am–5pm Monday to Friday” but your team actually works rostered shifts, you’ve created a mismatch that can quickly lead to disputes about overtime, availability, and changing rosters.
2. Vague Job Descriptions And “Other Duties” Clauses
It’s normal to want flexibility (especially in a small team). But if you rely on an “other duties as required” clause without properly describing the core role, you can create uncertainty about what’s reasonable to ask the employee to do.
A better approach is to set clear primary duties, then include a reasonable flexibility clause that fits the role and your business size.
3. Not Being Clear About Pay Structures
If you offer commission, bonuses, or incentives, you need to be very clear about:
- How commission is calculated (and what counts as a “sale”).
- When it is earned and payable.
- What happens if the employee resigns mid-month or a customer cancels/refunds.
If you’re considering performance-based pay, it may also be worth thinking carefully about whether “commission only” is appropriate and lawful for the role. An commission-only arrangement can create compliance risks if not structured carefully.
4. Changing Terms Without Agreement Or Consultation
In a growing business, you might need to adjust hours, responsibilities, reporting lines, or work location.
But you generally can’t change contractual terms unilaterally just because business needs have shifted. This is where good faith consultation becomes essential - and where businesses can accidentally trigger personal grievances if they move too quickly.
If you’re considering changes to working time, it’s helpful to understand the practical and legal risks around reducing staff hours before you make any announcements.
5. Treating Contractors Like Employees (Or Vice Versa)
Some businesses try to “solve” employment compliance by calling someone a contractor. But the label doesn’t decide the legal relationship - the real working arrangement does.
If your worker is effectively part of your business (set hours, direction and control, integrated into your team, not really running their own business), they may be an employee regardless of what the contract says.
If you’re engaging contractors, make sure you have the right documentation in place, such as a properly drafted contractor arrangement that matches reality.
How Good Faith Shows Up In Day-To-Day Employment Management
Good faith isn’t just a “negotiation” concept. It shapes how you manage people across the entire lifecycle of employment.
If an employee isn’t meeting expectations, good faith usually means:
- Raising the concerns clearly and early (not saving them up).
- Giving the employee a real chance to respond.
- Providing support and reasonable time to improve where appropriate.
- Following a fair process before making any final decisions.
Even when the outcome feels obvious to you as the employer, process matters. Employment disputes often focus less on “what happened” and more on whether you handled it fairly.
Restructures And Redundancy Processes
When roles are changing, or you’re considering redundancy, good faith generally requires genuine consultation. That often involves:
- Providing relevant information about the proposed change.
- Giving the employee time to consider and respond.
- Genuinely considering their feedback before final decisions.
- Exploring reasonable alternatives (depending on the circumstances).
Because restructures can move quickly in small businesses (especially when cashflow is tight), it’s a good idea to get advice early so you don’t accidentally cut across your legal obligations.
Privacy, Monitoring, And Workplace Technology
Modern workplaces run on devices, messaging apps, CRMs, and cloud platforms. That’s great for productivity - but it also creates privacy and transparency issues.
If you monitor emails, calls, internet usage, or use workplace cameras, you’ll want to make sure you’re handling it in a lawful and fair way. For example, CCTV may be lawful, but it needs to be used for legitimate reasons and with clear communication. The rules and expectations are not always intuitive, which is why employers often check workplace cameras before installing anything.
On top of that, the Privacy Act 2020 affects how you collect, store, use, and disclose personal information (including employee information). If your business collects personal information online or through forms, you’ll usually also want a Privacy Policy in place to set expectations and reduce risk.
Key Takeaways
- A clear, tailored employment agreement helps you set expectations, manage risk, and build a healthy employment relationship from day one.
- In New Zealand, good faith is a core legal obligation - it affects how you negotiate agreements and how you manage employees day to day.
- Good faith doesn’t mean you must always agree, but it does mean you must be honest, transparent, and procedurally fair (especially around changes to terms, performance concerns, and restructures).
- Common mistakes include using generic templates, being vague about duties or pay, and changing hours or responsibilities without proper consultation.
- Fixed-term and trial arrangements can be useful, but they need to be set up carefully and for the right reasons.
- Workplace policies (including privacy and monitoring) should line up with your employment agreement so your expectations are clear and enforceable.
If you’d like help with an employment agreement, workplace policies, or advice on good faith processes, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
