New Zealand: Labour and employment

Doing Business in NZ

Haere mai is Māori for welcome and New Zealand is one of the most open economies in the world. But there are rules and regulations that will apply, and we are familiar with them.

This "Doing Business in NZ" publication is designed to provide the prospective investor with an introductory guide to the New Zealand legal framework as it applies to business. The information provided was accurate at the time of publication, and will be updated regularly. But it should not be relied upon as a basis for making business decisions as circumstances, business conditions, government policy and interpretation of the law may change.

We recommend that you seek advice specific to your needs before making any decisions and will be happy to assist.

Employment Relations Act

The Employment Relations Act 2000 is the principal statute governing employment in New Zealand. It aims to promote good faith in the employment relationship and the right of workers to bargain collectively.

Agreements must be in writing, and may be individual (between an individual employee and the employer) or collective (between one or more unions and one or more employer). From 1 July 2011 employers must hold a signed copy of employment agreements.

Union membership is not compulsory but all collective agreements must be negotiated and concluded by a union.

Good faith

The parties to an employment relationship must not do anything, either directly or indirectly, to mislead or deceive each other. They must be "active and constructive," as well as "responsive and communicative" in their dealings.

The Act also requires parties to bargain in good faith. Employers and employees/unions must, at a minimum; come to the bargaining table, listen and respond to what the other party puts forward. Parties bargaining for a collective agreement must conclude the collective contracts unless there are "genuine reasons" not to.

Further, employers proposing to take an action that may have an "adverse effect"on their employees must (subject to genuine although strict confidentiality exceptions) provide information about the decision and consult with their employees in good faith before the decision is made.

Sale of a business/contracting out

When engaging in a sale, merger or contracting out arrangement, as well as complying with the good faith/consultation requirements described above, an employer must negotiate with the proposed purchaser/new employer in relation to the employees. Such negotiations must include discussion about who will be offered employment with the new employer, and on what terms and conditions.

The Act also provides that "vulnerable employees" (primarily cleaning and food catering workers, as well as some other types of vulnerable workers in specified sectors) are entitled to transfer to the new employer as of right and to bargain for redundancy payments with the new employer if their services are not required.

Termination

Most individual employment agreements are indefinite (i.e. they continue until terminated) but the law also recognises casual and fixed term employment arrangements. Fixed term agreements are lawful, but subject to certain restrictions.

The employee can end an indefinite employment arrangement by giving the specified notice period. However, an employer can terminate an employee's employment only after following a prescribed legal process and only for reasons of redundancy, misconduct, poor performance or incapacity. However employers can agree on a written 90 day trial period, during which they can end employment without following the normal process or facing a personal grievance. The courts supervise trial period clauses very strictly (for example agreements with trial clauses must be signed before the employee starts work).

There is no statutory right to redundancy compensation in New Zealand and, other than in very limited circumstances, compensation is only payable if it is provided for in the employment agreement.

Dispute resolution

The Act encourages mediation as the primary means of settling employment disputes. If mediation is unsuccessful, the parties may have their dispute decided by the Employment Relations Authority, an investigative body. If still unsatisfied, parties have a right of appeal to the Employment Court.

Very often employment disputes are solved in mediation and do not proceed to litigation.

Strikes and lockouts

The only lawful strikes or lockouts are those which relate either to bargaining for a collective agreement or to health and safety issues.

When a strike occurs, an employer can only use existing employees to perform the work of the striking employees, and then only if the existing employees agree to perform the work. External workers may only be employed when the work is necessary for public health and safety reasons.

Union access

Union representatives have a right to request access to a work place at reasonable times, in a reasonable manner, for purposes related to union business (which includes recruiting members). Employers cannot unreasonably refuse access.

Working conditions

Workforce

In general, the New Zealand workforce is well-educated and well-trained. There are occasional shortages of senior management and skilled technical employees.

Wages

The minimum wage under the Minimum Wage Act 1983 is reviewed annually. Currently, the minimum wage for employees over the age of 18 is NZ$13 an hour or NZ$104 for an 8 hour day, or NZ$520.00 for a 40 hour week. The average total weekly earnings (full time equivalent) as at March 2011 were NZ$997.40. (Source: Quarterly Employment Survey, Statistics New Zealand).

Holidays and leave

In addition to 11 statutory holidays, employees are entitled under law to at least four weeks' paid annual leave after 12 months of employment.

After six months' continuous employment, employees are entitled to:

  • a minimum of five days' sick leave which they can also draw on when their spouse or someone who depends on them for care is sick or injured. Accumulated sick leave to at least 15 days must be carried over from year to year, and to
  • bereavement leave of three days on the death of an immediate family member and of one day in all other circumstances where the employer accepts that the employee has suffered bereavement.

KiwiSaver

All new employees must be automatically enrolled in the KiwiSaver superannuation scheme. Automatic enrolment does not apply to temporary employees or to most business sale situations. Existing employees can also enrol in KiwiSaver if they wish.

Employees who are automatically enrolled have a six week period in which they can opt out.

Employees who are members of KiwiSaver will have part of their gross earnings (minimum of 2%) deducted and paid by their employer to a superannuation scheme. Required employer contributions are 2%. Total remuneration approaches to KiwiSaver are generally permitted.

Payroll tax

In addition to KiwiSaver contributions and ACC levies (see below), employers in New Zealand are required to deduct "Pay As You Earn" payroll tax (PAYE). Deductions are made on a fortnightly or monthly basis. The Inland Revenue Department may also require other deductions such as payments towards student loans or child support.

Parental leave

The Parental Leave and Employment Protection Act 1987 provides for both parents to take specified periods of parental leave (unpaid) on the birth or adoption of a child.

Government funded paid parental leave

Primary caregivers are entitled to receive up to 14 weeks' paid leave of a maximum of $429.74 (gross) per week, increasing to $458.82 (gross) per week from 1 July 2011, or 100% of the parent's previous weekly earnings, whichever is the lower.

To be eligible, parents must have been in paid employment with a single employer for at least an average of 10 hours per week for at least six months before the birth or adoption of a child

The scheme allows the mother of the child to claim the paid leave or transfer the payment to the child's other parent, whether the father or a same sex partner.

Equal opportunities

Legislation is in place to ensure that employers cannot discriminate on the basis of an employee's (or prospective employee's) sex, marital status, religious beliefs, ethical beliefs, colour, race, ethnic or national origin, disability, age, political opinion, employment status, family status, sexual orientation or union involvement.

Health and safety

Employers and employees in control of workplaces have an obligation under the Health and Safety in Employment Act 1992 to take all practicable steps to prevent harm to employees. The obligations under this legislation are onerous, and fines and reparation awards can be significant.

Accident Compensation

In New Zealand, legal claims relating to personal injury are prohibited under the Accident Compensation Act 2001. Instead, the Act provides a statutory no-fault scheme under which cover is available for those suffering personal injury.

Coverage is broad based and includes most personal physical injuries, regardless of whether they occur in the workplace or elsewhere. Unless a crime is involved, purely mental injury is not covered by the scheme.

Compensation for injuries can take the form of payments for loss of earnings, health care treatment, cost of rehabilitation, independence allowance for disability, funeral expenses and death benefits for dependents. The scheme is funded from a number of sources, including levies on employers (linked to the amount of wages paid, with levy rates being determined on the basis of injury rates in the relevant industry), levies on employees, taxes on vehicle registration and taxes on petrol.

Accident compensation benefits are available to non-residents who are injured while in New Zealand. However, earnings-related compensation is not available to non-residents who derive their income from outside New Zealand.

We make every effort to ensure the accuracy of the information provided but it should not be relied upon as a basis for making business decisions as circumstances, business conditions, government policy and interpretation of the law may change.

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

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