10 laws every employer should know

This Article was posted on 04.02.11 in Starting up,Growth and Managing

Being an employer is far more involved than signing an employment agreement and paying your staff for the hours they work. There are tax deductions to make, ACC levies to pay, and a myriad of other laws and regulations to be aware of.

Below is a brief outline of 10 laws that every employer should know, which should serve as a guide and point you in the right direction for finding additional comprehensive advice.

Pay deductions and ACC

As an employer, you are responsible for deducting PAYE tax from your employee’s wages and paying these deductions over to Inland Revenue. You might also need to deduct tax on schedular payments and amounts for student loans, child support, or KiwiSaver.

You’ll also need to register with the Accident Compensation Commission (ACC) and pay an annual levy for ACC WorkPlace Cover, which is based on how much you pay in wages and the type of industry you are in. (Employees also pay an ACC levy – this is included in their PAYE deduction).

90-day trial period

A new law was introduced in March 2009 allowing small businesses with less than 20 employees to hire new staff on an optional trial period of up to 90 days. The idea behind the trial period is to encourage employers to give people a chance to see if they are suitable for the job. If agreed to, the trial period allows the employer to end the employment with no further obligations provided notice is given within the agreed trial period.

This optional trial period is due to be extended to all businesses, but will only be available to businesses employing 20 employees or more once this change to the labour law has been approved.

The trial period of up to 90 days is only applicable to new staff. It must be agreed in writing and is for a once-off trial. You can’t negotiate a second trial period.

Public holidays

All employees are entitled to a paid day off on a public holiday if the holiday falls on a normal working day for them. As a general rule, an employee and employer can’t agree to observe the public holiday on a different day, but shift workers whose shift spans two days can reach agreement to transfer the day.

Payment for employees who work on a public holiday is at time-and-a-half for the hours worked. If the public holiday they worked falls on a normal working day, they’re also entitled to a paid day’s leave at another time regardless of how many hours they worked on the public holiday.

Holiday entitlement

Employees are entitled to four weeks’ paid annual leave for each full year worked. The leave can be taken at any time agreed to between the employee and the employer, and employees have the right to ask to take off a continuous period of up to two weeks.

Employees who have not worked a full year can take part of their annual leave in advance if the employer agrees to this. Employees are entitled to receive their pay for the holiday period before the holiday commences unless both parties agree to the normal pay cycle continuing during the time off work. They are also entitled to be paid out for holidays not taken.

The Department of Labour has an online tool to help you calculate holiday entitlements.

Sick leave, bereavement and parental entitlements

After working for an employer for six months, an employee is entitled to five days sick leave on full pay every 12 months. You can accumulate and carry over up to 15 days sick leave. Employees can take sick leave if they are sick or injured, or if their spouse or someone who depends on them for care is sick or injured.

An employer can ask for a medical certificate, at the employees cost, for a consecutive period of three days or more, and can also insist on a medical certificate, at the employers expense, if they have reasonable grounds to suspect the sick leave is not genuine, even if the sick leave is for two days or less. In both cases, the choice of medical practitioner is at the discretion of the employee, not the employer.

Employees are also entitled to paid bereavement leave after six months of employment. This entitlement is three days leave for close-family death and one day for a close friend. Employees also have a parental leave entitlement if they’ve worked for the company for more than six months.

Compulsory leave

Employers can require employees to take leave at certain periods if the business usually closes down for Christmas or the end of a season, but the employer is required to give the employee 14 days’ notice. If both parties can’t agree on holiday dates, the employer can tell the employee when to take annual holidays, even if the workplace is not closing down, provided 14 days’ notice is given.

Work break entitlement

Employees are entitled to:

  • One paid 10-minute rest break if their work period is between two and four hours.
  • One paid 10-minute rest break and one unpaid 30-minute meal break if their work period is between four and six hours.
  • Two paid 10-minute rest breaks and one unpaid 30-minute meal break if their work period is between six and eight hours.

The timing of these breaks can be agreed to by both parties. If no clear agreement can be reached, they should be spread out throughout the day.

Employment agreements

Every employee should have a written employment agreement. The employment agreement can be an individual or a collective agreement. The Department of Labour has an online employment agreement builder to help you draw up an employment agreement. This should be agreed to and signed by both employer and employee.

It is good practice to include a detailed job description as part of the employment agreement so that all parties are clear on what is expected of them.

Minimum wage

New Zealand employers are required to pay all employees aged 16 years or over at the minimum wage rate, or higher. There are three rates that can apply but the most common is the adult minimum wage of $12.75 an hour, which applies to all employees aged 16 or over who are not new entrants or trainees.

There is also a minimum wage of $10.20 for new entrants to the job market aged 16 and 17. Employers are required by law to pay the minimum wage rate; exceptions can only be made for employees who hold an exemption permit.

Disciplinary action

If employees know what is expected of them and are managed with constructive feedback and performance reviews, it should not be necessary start disciplinary action unless you need to raise serious concerns about poor performance or misconduct with an employee. In most cases, disciplinary actions are warnings, but for serious cases this could result in suspension without pay or dismissal.

It is important that disciplinary action is only used for good reason and that the process is fair. If you’re instituting a disciplinary action, we’d suggest that you contact the Department of Labour or a labour lawyer for advice to ensure that you meet all the legal requirements. You can also download The Employer’s Guide to Employment Relations.

You might be able to solve the problem yourself, but you could also make use of the Department of Labour’s mediation service.

Next Steps

Content provided by The Small Business Company

More articles and resources