Employment agreement New Zealand: what employers must include

Published Saturday 15 August 2026

Table of contents

• What is an employment agreement in New Zealand?
• Individual vs collective employment agreements
• Nine things every employment agreement must include
• Optional clauses worth adding
• Common mistakes employers make with employment agreements
• What happens if you don't provide a written employment agreement?
• How to create an employment agreement in New Zealand
• 2026 employment law changes that affect agreements
• Simplify your employment admin with Xero
• FAQs on employment agreements in New Zealand

Key takeaways

• Every employee in New Zealand must have a written employment agreement before they start work. This is a legal requirement under the Employment Relations Act 2000, and failing to provide one can result in fines of up to $20,000.
• An individual employment agreement must include nine minimum clauses covering names, job description, place of work, hours, pay, dispute resolution, public holiday entitlements, employment protection provisions, and the nature of the employment.
• The Employment Relations Amendment Act 2026 introduces significant changes, including a contractor classification gateway test, expanded 90-day trial periods for all employers, and new rules for high-earner dismissals.
• You can build a compliant employment agreement for free using the government's online Employment Agreement Builder, which walks you through every required clause.

What is an employment agreement in New Zealand?

An employment agreement is a legally binding document between you and your employee that sets out the terms and conditions of the working relationship. In New Zealand, the Employment Relations Act 2000 requires every employment agreement to be in writing, regardless of whether someone works full-time, part-time, casually, or on a fixed-term basis.

Why every employee needs a written agreement

A written employment agreement isn't optional. Under the Employment Relations Act 2000, you must provide every employee with a written agreement before their first day of work.

A clear agreement protects both parties. It reduces misunderstandings about pay, hours, and responsibilities. If a dispute arises, you can refer back to what was agreed.

Without a written agreement, you lose the ability to rely on clauses like trial periods, restraint of trade, or specific notice periods. You're also exposed to penalties.

Individual vs collective employment agreements

New Zealand recognises two types of employment agreements. Understanding the difference helps you choose the right one for your business.

Individual employment agreements

An individual employment agreement is between you and one employee. Most small businesses use individual agreements.

You negotiate the terms directly with the employee. These terms can vary from person to person, depending on the role, experience, and responsibilities.

Every individual employment agreement must include the nine mandatory clauses set out in the Employment Relations Act 2000. You can also add optional clauses to cover trial periods, confidentiality, and notice periods.

Collective employment agreements

A collective employment agreement covers a group of employees who belong to the same union. The union negotiates the terms on behalf of its members.

Collective agreements are more common in larger organisations and specific industries like healthcare, education, and construction. If your employees are union members, you may need to bargain collectively.

Under the 2026 law changes, the 30-day rule requiring new employees to start on collective agreement terms has been removed. New hires can now start on individual terms straight away, even where a collective agreement covers the role.

9 things every employment agreement must include

The Employment Relations Act 2000 sets out nine clauses that every individual employment agreement must contain. It’s your responsibility as an employer to get this right, and missing any of these can result in penalties.

Names of employer and employee

Include the full legal names of both parties. For your business, use the registered company name or trading name. For the employee, use their full legal name.

Description of the work

Clearly describe the role and its key responsibilities. Avoid vague descriptions like "general duties" or "as required." A solid job description helps the employee understand what's expected and protects you if performance issues arise.

Place of work

State where the employee will primarily carry out their work. This could be your office, a specific site, or multiple locations. If the role involves working from home or travelling between sites, include that detail.

Hours of work

Specify the agreed hours of work, or the method for determining them. Include the number of hours per week, the days of the week, and start and finish times where possible.

If hours vary, explain how they'll be determined. For example, you might roster hours weekly or fortnightly based on business needs.

Wages or salary and how it will be paid

State the pay rate or salary, the pay frequency, and the payment method. You must pay at least the minimum wage, which is $23.95 per hour as of 1 April 2026. Include whether you'll pay weekly, fortnightly, or monthly, and on which day.

Dispute resolution process

Every employment agreement must include a plain language explanation of how employment relationship problems will be resolved. At minimum, reference that either party can seek help from Employment New Zealand's mediation service. You can also include an internal process as a first step.

Public holiday pay entitlement

Your agreement must explain the employee's entitlement to public holidays. New Zealand has 11 national public holidays each year, plus one regional anniversary day. If an employee works on a public holiday, they're entitled to time-and-a-half pay and may also get an alternative day off.

Employment protection provision

This clause covers what happens if your business is sold, transferred, or contracted out. It's designed to protect employees during restructuring.

You must include a provision explaining whether affected employees will transfer to the new employer, and what consultation process you'll follow.

Nature of the employment

State whether the employment is permanent, fixed-term, or casual. If it's a fixed-term arrangement, you must include the reason for the fixed term and the way the employment will end.

Getting this clause right matters. If you label a role as casual but the employee works regular, predictable hours, a court may decide the employment is actually permanent.

Optional clauses worth adding

Beyond the nine mandatory clauses, several optional clauses give you added protection and help set clear expectations from day one.

• Trial period: Allows you to dismiss a new employee within the first 90 days if the role isn't working out, without the risk of a personal grievance claim for unjustified dismissal. The trial period must be agreed in writing before the employee starts.
• Notice period: Sets out how much notice either party must give to end the employment. Without a notice period clause, you'll need to provide "reasonable notice," which can be vague and open to dispute.
• Confidentiality clause: Protects sensitive business information like client lists, pricing, and trade secrets. This clause should clearly define what counts as confidential information and how long the obligation lasts.
• Restraint of trade: Limits an employee's ability to work for a competitor or start a competing business after they leave. Courts in New Zealand will only enforce restraints that are reasonable in scope, duration, and geographic area.
• Key performance indicators (KPIs): setting clear expectations around performance gives you a foundation to manage underperformance if needed.
• Leave above statutory minimums: Offering extra annual leave, sick leave, or parental leave can make your business more attractive to potential hires.

Common mistakes employers make with employment agreements

Even well-intentioned employers make mistakes with employment agreements. Avoiding these common pitfalls saves you time, money, and stress.

• Not providing a written agreement before work starts. This is the most common breach. The agreement must be in writing and provided before the employee's first day.
• Using vague job descriptions. Descriptions like "assist with general duties" create confusion and make it hard to manage performance or justify a dismissal later.
• Missing the dispute resolution clause. This is a mandatory requirement. Leaving it out means your agreement doesn't meet the legal minimum.
• Not updating agreements when the law changes. Employment law in New Zealand changes regularly. Review your agreements at least once a year to stay compliant.
• Relying on generic templates without customising them. A template is a good starting point, but you need to tailor it to each role and your specific business situation.
• Not allowing enough time for the employee to review the agreement. Employees have the right to seek independent advice before signing, and pressuring someone to sign on the spot can undermine the agreement's enforceability.

What happens if you don't provide a written employment agreement?

Failing to provide a written employment agreement carries real financial consequences. A labour inspector can issue an infringement notice with a fine of $1,000 per employee who doesn't have a written agreement.

Beyond the infringement notice, the Employment Relations Authority (ERA) can order additional penalties. An individual employer can face penalties of up to $10,000 per breach. A company or body corporate can face penalties of up to $20,000 per breach.

The maximum total infringement fees in any three-month period is $20,000. ERA penalties are separate and can apply on top of infringement fees.

There's also a practical cost. Without a written agreement, you can't rely on trial periods, restraint of trade clauses, or specific notice periods. For more advice on hiring new employees, see this handy guide.

How to create an employment agreement in New Zealand

Creating an employment agreement doesn't need to be complicated or expensive. The simplest option is the government’s free Employment Agreement Builder. This online tool walks you through each mandatory clause and generates a compliant agreement tailored to your situation. It takes about 30 minutes to complete, and you can save your progress partway through.

For more complex situations, consider consulting an employment lawyer, especially if you're hiring senior staff, including restraint of trade clauses, or employing workers under a collective agreement.

Regardless of which approach you take, follow these steps:

1. Draft or generate the agreement before you make a job offer.
2. Include all nine mandatory clauses.
3. Add any optional clauses relevant to the role.
4. Provide the agreement to the employee before their first day of work.
5. Give them a reasonable amount of time to review the terms and seek independent advice.
6. Both parties sign the agreement and keep a copy.

2026 employment law changes that affect agreements

The Employment Relations Amendment Act 2026 came into force on 21 February 2026. It introduces several changes that directly affect how you draft and manage employment agreements.

Contractor classification gateway test

The new law introduces a "gateway test" to clarify whether a worker is a contractor or an employee. If a written contract meets specific criteria around control, working hours, and the ability to work for other clients, the arrangement will be recognised as a genuine contractor relationship. This means the worker can't later challenge their classification through the ERA or Employment Court.

For small businesses that use contractors, this provides more certainty. Make sure any contractor agreements clearly meet the gateway test criteria.

Changes to trial periods

The 90-day trial period has been expanded to all employers, regardless of business size. Previously, only employers with fewer than 20 employees could use trial periods.

If you're hiring and want the flexibility of a trial period, make sure the clause is included in the written agreement and signed before the employee's first day. Trial period provisions that aren't in writing before work starts are unenforceable.

High-earner dismissal protections

Employees earning over $200,000 per year are now largely excluded from raising personal grievance claims for unjustified dismissal. The reasoning is that high earners have the resources to negotiate their own contractual protections.

If you employ staff at this salary level, review their agreements. Consider adding contractual protections to replace the statutory ones they've lost. Existing high earners have a 12-month grace period to renegotiate terms.

Collective agreement changes

The 30-day rule has been removed. Previously, new employees had to start on the terms of the applicable collective agreement for their first 30 days, even if they didn't join the union.

Under the new law, you can offer new hires an individual employment agreement from day one. You must still provide them with a copy of any relevant collective agreement, but they're no longer required to start on its terms.

Simplify your employment admin with Xero

Managing employment agreements is just one part of running a small business. Once your team is set up, you still need to handle payroll, leave, and employee records.

Xero brings your payroll and employee admin into one place. You can run pay, file payday returns, and manage leave balances without switching between systems. Automated calculations help you stay on top of tax, KiwiSaver, and public holiday entitlements.

Keen to see how easy it can be to simplify your employment admin? Get one month free

FAQs on employment agreements in New Zealand

Here are answers to some of the most common questions employers have about employment agreements.

Can I use a verbal employment agreement in New Zealand?

No. The Employment Relations Act 2000 requires all employment agreements to be in writing. A verbal agreement doesn't meet the legal requirement, and you can be fined $1,000 per employee without a written agreement.

Can an employee negotiate their employment agreement?

Yes. Employees have the right to review, seek advice on, and negotiate the terms of their agreement before signing. You should allow a reasonable amount of time for this process.

How often should you update an employment agreement?

Review your agreements at least once a year, or whenever there's a significant change in employment law. The 2026 amendments are a good prompt to check your current agreements against the new requirements.

What is the difference between a contract and an employment agreement?

In New Zealand, "employment agreement" is the correct legal term under the Employment Relations Act 2000. The term "contract" usually refers to a contractor arrangement, which is a different legal relationship. Using the right language helps avoid confusion about the nature of the working arrangement.