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NEW ZEALANDLabor Laws
In New Zealand, the following two points of due cause and procedural fairness are required for dismissal under the Employment Relations Act 2000 (EA), and employees are protected heavily. Meanwhile, grounds for due cause include downsizing due to oversupply, poor business performance, and serious misconduct, but companies may separately prescribe specific acts that would result in a dismissal and reach an agreement with their employees in advance, and dismiss employees if they correspond to such acts. Thus, companies can prescribe provisions that would work advantageously for them to a certain extent.
With regard to the employment of foreigners, while there are essential skill visas in which the company is required to certify that such worker's skills are essential for its business, highly skilled migrant visas based on a point system according to the worker's age and experience, and visas for entrepreneurs and investors, it could be said that New Zealand is somewhat restrictive.
Points to consider regarding labor management, characteristics of labor practices, and the status of recent labor policy in New Zealand
Combination of common law and statutes
Unlike Japan's civil law system, New Zealand has flexible employment laws regulated by a combination of statute and common law. While the main governing statutes, such as the Employment Relations Act 2000 ("ER Act") and the Holidays Act 2003 ("Holidays Act") serve as the basis for employer and employee's rights and obligations, contract law and case law created by the New Zealand courts (in some cases, by other commonwealth courts such as Australia and the United Kingdom) also have important roles. The Ministry of Business, Innovation and Employment (MB) is the main entity concerned with administering and enforcing these provisions.
*Overview of Common Law and Civil Law
Common Law is a legal system mainly in use in the UK and in nations formerly part of the British Empire (the USA, Canada, Australia, New Zealand, etc.), which emphasizes decisions based upon traditions, customs, and precedent.
On the other hand, civil law developed on the European continent in nations, such as France and Germany, and as a legal system compared to common law, civil law places emphasis on statutes. Japan uses a civil law legal system.
Good Faith
Section 4 of the ER Act imposes a duty of good faith on the parties of an employment relationship. This duty includes not doing anything to mislead and is wider than a mutual obligation of trust and confidence. This duty governs all interactions between the parties and is present for the entire relationship. The duty of good faith applies to the extent that if an employer proposes a decision that might adversely affect an employee, the employer must then provide that employee information and an opportunity to comment before the decision is made.
When making a decision that might adversely affect an employee, the employer must ensure that they are acting in good faith.
Employees have a minimum floor of protection under statute law
The ER Act provides a better framework for employment relations, and gives an extensive set of rights to employees that contract law alone did not provide before the enactment of the ER Act.
In New Zealand, there must be a written employment contract for all employment relationships. The legal framework provides for minimum rights for employees that cannot be contracted out of - mainly coming from the ER Act and the Holiday Act. These include minimum rights regarding salary and wages, annual leave, parental leave, and break entitlements that include breastfeeding breaks. Such rights require specific procedures to be followed for dismissals and redundancies. However, freedom of contract is still vital in the employment relationship: an employer and employee are entitled to negotiate what additional terms they decide to govern their relationship to be included in the mandatory written contract. These additional terms cannot be contrary to law or inconsistent with the ER Act.
Extensive procedural and substantive requirements for termination of employment
The ER Act provides three main ways an employment relationship can be terminated: (i) resignation, (ii) dismissal, and (iii) redundancy. There are strict procedures that need to be followed for dismissals and redundancy. If these are not followed, the dismissal can be considered unjustified, thus allowing the employee to bring a claim for unjustified dismissal under s103(1)(a). The bottom line is that there must be a legitimate reason to dismiss the employee unlike in Singapore, the United States, and other jurisdictions.
Similar to Japan, the employer must dismiss the employee on reasonable grounds for the dismissal to be considered substantively fair. However, additionally, an employer must prove a termination was procedurally fair. In assessing procedural fairness, relevant factors in the case of a dismissal include whether notice was given to the employee before termination, whether the employee had a genuine opportunity to be heard, whether a proper investigation took place, and whether the employee had a chance to bring a support person to a meeting prior to being dismissed. For redundancy, they include giving reasonable notice of redundancy, advising the employees that their work might change, and consulting with employees about the redundancy; this includes seeking employee input, considering redeployment, giving the employees a reasonable amount of time to make representations about redundancies, and selecting positions to be made redundant in a fair manner. As there is no law stipulating how much compensation is owing, dismissal and redundancy payments should be outlined in the employment agreement.
However, the above do not apply to summary dismissals for serious misconduct. The procedure for summary dismissals for serious misconduct differs from the above procedure.
Freedom of association, unions and collective bargaining
New Zealand used to be one of the most unionized countries in the world. However, now union members amount to around 14.30% of the workforce.1 The ER Act recognizes unequal bargaining power between an employer and employee. It promotes collective bargaining and dispute resolution between the parties. The ER Act also aims to promote the right to freedom of association in its provisions: it encourages employees to join unions and engage in collective bargaining. Unions are given formal legal recognition under Part 4, as long as they are registered. Imposing contractual conditions based on whether a person is a member or not a member of a union is prohibited.
Unions enable employees to engage in collective bargaining with employers to reach a collective agreement between union members and the employer. Part 5 governs the procedure regarding collective bargaining. The core obligation is a duty of good faith under section 32, and it imposes the basic requirements of the duty to supply information and to consider and respond to proposals. For instance, it would be a breach of good faith if an employer refuses to enter into negotiations to conclude a collective agreement. However, an employee is prohibited from free riding on a collective agreement if they are not a union member.
Kiwisaver
New Zealand has a unique voluntary long-term government saving initiative called Kiwisaver. Employers make contributions, and deductions are also made from employee salaries and wages into what is essentially a retirement fund. If a respective employee is a Kiwisaver member, employers would be required to make compulsory contributions to the employee’s account. Alternatively, if an employee has opted out, the whole wage would need to be paid to the employee. Employer contributions, as well as all of the employer's obligations in relation to Kiwisaver shall be outlined in later sections of this report.
Latest reforms
There have been a number of amendments to the labor law in New Zealand in the past year which include the following:
Repeal of the Fair Pay Agreements Act
The Fair Pay Agreements Act has been repealed with effect from 20 December 2023. The previous Labor government passed the law in December 2022 to give effect to a new bargaining system with respect to minimum employment terms for covered employees in an industry or occupation. However, this was opposed by the current new government. After the repeal, there are still existing ways for union workers to bargain with employers for terms and conditions.
Protection against migrant and employee exploitation
The Worker Protection (Migrant and other Employees) Act came into force on 6 January 2024, which reinforces immigration and employment laws to protect migrant employees from exploitation. Under the amendment, the employers are now required to supply records for inspection to a Labor Inspector within 10 working days of request for inspection. Failure of complying with this requirement will be an infringement offence where the Labor Inspector may issue an infringement notice up to a maximum of $20,000 in infringement fees in a three-month period or seek a penalty at the Employment Relations Authority for each breach up to $10,000 against an individual and $20,000 against a corporation. The people convicted of migrant exploitation will be disqualified from managing a company.
90-day trial periods
From 23 December 2023, all employers are able to use 90-day trial periods regardless of the employers’ size. The 90-day trial periods were previously only available to employers with fewer than 20 employees.
Personal grievance related to sexual harassment
From 13 June 2023, the Employment Relations (Extended Time for Personal Grievance for Sexual Harassment) Amendment Act allows employees to raise a personal grievance related to sexual harassment within 12 months of the sexual harassment event occurring or coming to notice of the employee. The timeframe was extended from the previous 90-day period. The employers are required to include the modified time in new employment agreements.
Increase of parental leave pay
From 1 July 2023, the maximum rate of parental leave payments increased from $661.12 to $712.17 per week.
Minimum wage increase
From 1 April 2024, the minimum wage will increase from $22.70 to $23.15 per hour.
Overview of basic labor laws of New Zealand
An employment law system founded on common law
When interpreting relevant statutes, case law coming from the Employment Court and in some cases from the Court of Appeal and the Supreme Court are of paramount importance.
As explained in Part 1, freedom of contract is still vital; however, the minimum rights enshrined in the ER Act and other relevant Acts take priority. Where an employment contract is inconsistent with some specified minimum rights, such as freedom of association (s10), that provision in a contract has no effect.
Employment Relations Act 2000
The ER Act essentially shifted the landscape of employment law from contract law to one of minimum rights. It gave rights to individuals and union members to negotiate and enter into agreements. Additionally, it provided a platform to resolve employment problems.
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Applicable persons
The ER Act governs all types of standard employment relationships, whether individual, collective, or fixed term. An employee is widely defined to capture homeworkers and persons intending to work; those who have accepted a job offer but have not started working yet. Therefore, employers have to take this definition into consideration.
However, the definition of "employee" does not include independent contractors or volunteers. A contractor is by definition someone who performs services under an independent contractor agreement. The test for a contractor is substance over form; even if someone calls themselves a contractor, they could still be classified as an employee. There are a number of tests developed by the courts to determine whether a person is a contractor, which include (i) the intention test, which considers what each party intended for the relationship to be, (ii) the control test, which looks at how much control the person who requests the services has over the person, (iii) the integration test, how central the work performed by the person is to the employer's business, and (iv) the Fundamental/Economic Reality Test, which considers the total situation of the work relationship to determine its economic reality. Similarly, a volunteer is a person who does not receive any reward for working. However, note that the Human Rights Act 1993 includes volunteers in the definition of employee to offer them protection against discrimination.
For employees who are considered employees under the ER Act, there are three main types of employment agreements: casual, fixed term, and permanent.
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Requirement for an employment contract
There are two types of employment agreements legally recognized in New Zealand: (i) an individual employment agreement, and (ii) a collective employment agreement. Sections 54 to 65 prescribe that both types of agreements need to be in writing and detail what must be in the provisions of such agreements.
Employers must keep a signed copy of an employment agreement. A breach of this rule may result in the employer being fined by a Labor Inspector up to $1,000 per breach up to a maximum of $20,000 in any three-month period.
The requirement for an employment contract does not, however, prevent an employee without a written agreement from enforcing their minimum rights. These minimum rights are enforceable in the absence of an employment agreement.
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Terms and conditions an employment agreement must contain
- the names of the employer and employee;
- description of the work to be performed;
- location of the employment and where the employee is to perform the work;
- agreed hours of work or any other arrangement relating to time;
- wages, salary, and other forms of compensation payable to the employee;
- a plain language explanation of how employment relationship problems are to be resolved, and these must include the employee's right to raise a personal grievance claim within 90 days (or 12 months for a personal grievance claim related to sexual harassment); and
- an explanation that the employee is entitled to remuneration at a time and a half if they work on public holidays.
Furthermore, for some employment arrangements, additional provisions should be included concerning employee protection provisions against business transfers/sales, contracting out, probationary arrangements, availability, and for fixed-term employments, the nature of the employment arrangement.
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Relevant minimum rights
The minimum rights guaranteed by law are detailed below and throughout this report.
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Break entitlements
Pursuant to the enactment and enforcement of the Employment Relations Amendment Act, 2018, employees must be given statutory rest and meal breaks based on the number of hours worked. Employers must provide a 10-minute paid rest break for four hours of work, and a 10-minute paid rest break and a 30-minute unpaid meal break for six hours of work. Employers and employees can agree as to the timing of the breaks; however, if there is no agreement, the breaks can be taken at set times, so long as it is reasonable and practicable.
Some limited exemptions may apply for some workers in specified essential services or national security services.
An employer is further required to provide appropriate breastfeeding facilities and breastfeeding breaks for employees who wish to extract breast milk while at work.
Noncompliance with these rules is subject to heavy penalties by a Labor Inspector; penalties of up to $50,000 against an individual, or for companies; the greater of $100,000 or three times the financial gain made by the company. The inspector may further order compensation or a banning order: this is detailed later in this report.
An employer and an employee can agree to forgo meal and rest breaks in return for compensation. The compensation must be at least what they would be getting: for instance, equivalent to the pay they would have gotten, or they can take the time they would have had off at another time. In practice, it is not uncommon that an employee finishes early but is still paid for the length of time that a reasonable break would have been if taken in full.
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Collective bargaining and union rights
The amendment in 2018 strengthened the rights of collective bargaining and labor union. For example, an employer's behavior can be seen as discriminatory if it occurs within 18 months of employees carrying out union activities, and union representatives can enter workplaces without consent.
Employers must pass on information about the role and function of unions to prospective employees and must provide new employees with the prescribed form within the employee's first ten days of employment. The form gives employees time to talk to their union representatives before considering and indicating whether they intend to join a union or remain on the individual employment agreement. In addition, employers must allow for reasonable paid time for union delegates to carry out their union activities, such as representing employees in collective bargaining and can no longer deduct pay in response to partial strikes, such as wearing t-shirts instead of uniforms as part of low-level industrial disputes. However, employers can still respond to a partial strike action the same way as any other strike, which could include suspending employees without pay or a lockout.
Regarding the collective agreements, it must include pay rates over the agreement's term, and new employees must be employed under terms consistent with the collective agreement for the first 30 days. Moreover, parties must conclude collective bargaining, unless there are genuine reasons based on reasonable grounds not to. Where an applicable collective agreement is already in force and before the collective agreement expires, unions can initiate bargaining 20 days ahead of employers.
Holidays Act 2003
The Holidays Act specifies that every entitlement provided in the Holidays Act is a minimum entitlement that must be written into in all employment agreements. The Act expressly states that enhanced or additional holidays can be provided, but a lesser number cannot be agreed between an employer and employee. The bottom-line of the Act is that employees are entitled to 4 weeks annual leave each year after one year of continuous fulltime work. If the employee works irregularly, it can be more practical to pay them an additional 8% of their gross wage in lieu of annual leave. This has to be agreed in the employment agreement.
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List of Annual Holidays in NZ
There are 11 public holidays in New Zealand:
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Annual Paid Leave Entitlement
After the end of each 12 months of continuous fulltime employment with any one employer, an employee is entitled to no less than four weeks annual paid leave. Continuous employment includes periods where the employee has taken sick leave, parental leave, or leave for injury, which are defined further in this report. This entitlement remains until the employee has taken such leave or has been compensated for not taking such leave. The employer must further allow the employee to take the leave within 12 months from the date the employee becomes entitled to it, and if the employee wishes, to allow the employee to take more than two weeks of the entitlement at one time. The employer cannot unreasonably withhold consent to an employee's request to take annual leave.
The employer is entitled to make the employee take some of the annual leave during a workplace closedown period when the employer's business or a portion of it customarily closes. Christmas break is a standard closedown period for New Zealand businesses. Note that there are some customary shutdown periods depending on the industry.
An employee is also entitled to receive cash for up to one week of annual leave a year. This means that the employee is paid one week of wages without taking the holidays. An employee cannot be pressured by an employer to take cash rather than their leave entitlement.
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Paid Sick Leave
An employee that has been employed continuously for more than six months is entitled to paid sick leave. Sick leave may be taken when the employee, spouse, partner, or a dependent is sick or injured.
An employee can take up to ten days of paid sick leave within 12 months. The number of paid sick leave days has increased from the previous five days from July 24, 2021, onwards. Sick leave not taken in a year may be carried over to the next year. An employee is not entitled to be paid for sick leave not taken. Employees can take more than ten days of sick leave, but the employer is not required to pay sick leave beyond ten days.
If sick leave is taken for more than three consecutive calendar days, the employer can require proof of sickness in the form of a medical certificate, issued at the employee's expense. The employer can request a medical certificate for less than three days of consecutive sick leave, but the employer must pay for this certificate.
Aside from the paid sick leave above, Domestic Violence Victims Protection Act, 2018, states that an employee who's been affected by domestic violence can request a paid leave from the employer—up to 10 days per year. This law was put into force on April 1, 2019.
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Paid Bereavement Leave
An employee is entitled to three days of bereavement leave after the death of a spouse, partner, parent, child, sibling, grandparent, or grandchild. For any other person that the employee had a sufficiently close relationship with, the employee is entitled one day of bereavement leave. The sufficiently close relationship is difficult to judge and is usually considered in an employee-friendly manner. If the employee says the person was sufficiently close to the person, it is difficult and unwise for an employer to try prove otherwise. This bereavement leave can be added together in the case of multiple deaths in the same period of time.
Other Acts
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Parental Leave and Employment Protection Act 1987
Parental leave in New Zealand is not limited to maternity leave, but extends to spouses and partners; thus including same-sex marriages and civil unions. Therefore, a parent of any gender is entitled to parental leave as paid by the Inland Revenue Department (IRD).
While the employer is legally required to approve such leave, the pay comes from a government scheme, and not from the employer, unless specifically agreed in the employment contract.
The parental leave may be transferred between partners and spouses. This extends to employees and their spouses or partners who are adopting a child under the age of six.
Different amounts of leave may be taken depending on whether the employee is a primary carer or not, and whether the employee has worked for the same employer continuously for more than six months, or for more than twelve.
Primary carer leave and amount
From July 1, 2020, onwards, an employee that is a primary carer is entitled to up to 26 weeks paid leave (increased from the previous 22 weeks), which can start six weeks before the due date.
The employee is further entitled to an unpaid extended leave up to one year if the employee has worked for the 12-month qualifying period, or for up to six months if the employee has worked for the six-month qualifying period. This one-year period is inclusive of the 26 weeks paid, and the employer has to keep the position available for the employee upon their return. For part time workers they have to have worked for more than 10 hours a week for those six months.
Employees who are the mothers are further entitled to special leave for any screenings and doctors' appointments that need to be attended. This is limited to 10 days and is unpaid.
Partner leave and amount
A partner is someone who is either married, in a civil union or de facto relationship with the primary carer, and includes both different and same-sex partners. A partner is entitled to one week paid leave if they meet the six-month threshold, and two weeks paid leave if they meet the 12-month threshold. A partner can take this leave between the period 21 days before the due date of the baby, or the date the partner or spouse becomes the primary carer for a child under six years, and 21 days after the baby is born or the date the partner or spouse becomes the primary carer for the child. Furthermore, the extended leave can be taken by both parents; they have a combined entitlement of 12 months if they meet the 12 month threshold, and six months if they meet the six-month threshold.
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Human Rights Act
The ER Act outlines grounds that the employer cannot discriminate against; these are also outlined in the Human Rights Act and include the following:
- Sex
- Marital status
- Religious belief
- Ethical belief
- Color
- Race
- Ethnic or national origins
- Disability
- Age
- Political opinion
- Employment status
- Family status
- Sexual orientation
If employers breach s 105 of the Human Rights Act they can be brought before the Human Rights Review Commission. The tribunal has the authority to award up to $350,000 for breaches.
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Accident Compensation Scheme (ACC)
ACC is a one of its kind no-fault compensation scheme that is unique to New Zealand. It takes away the right to sue for personal injury, but ensures that those who suffer personal injuries, whether work-related or not, are compensated and supported, except in cases of gross negligence.
Employers are required to pay Workplace Cover levies for current and future costs of work-related injuries that occur in the levy year, which is from April 1 to March 31. Different levy rates apply to different industries, as some industries are prone to more ACC claims. For a list of the levy rates for each industry is available on the ACC website.
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Kiwisaver Scheme
Under the Kiwisaver Act, the employer has various obligations, such as making proper deductions, registering the employee with IRD, and providing information to new employees. Both the employer and employee contribute to the fund; the employee's being directly deducted from their pay.
New employees who are eligible are automatically enrolled into Kiwisaver, and employers have an obligation to provide a Kiwisaver information pack to such employees within seven days from the day the employee commenced working. Therefore, employers have a responsibility to check whether new employees are eligible for the scheme. If they are, the employee must provide the employer with an IRD number, and all other relevant information required, such as name, address, and whether they are already part of Kiwisaver.
The employer must provide this information to the IRD (on form KS1) no later than the date of the next Employer Monthly Schedule (i.e. the 20th day of the following month).
An employer is responsible for making proper Kiwisaver deductions from the employee's pay. An employee can decide to contribute 3%, 4%, 6%, 8%, or 10% of their pay; if not specified then the default rate is 3%.
If an employee has nominated KiwiSaver, an employer must also contribute a minimum 3% of the employee's pay into Kiwisaver. Both the employee and the employer can make further voluntary contributions to Kiwisaver at any time.
Record keeping obligations apply to Kiwisaver deductions. Employers must keep a record of which employee is a Kiwisaver member, and pay slips must show how much of an employee's pay is deducted for Kiwisaver and how much the employer has contributed.
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Workplace Health and Safety
The Health and Safety at Work Act 2015 governs the employer's responsibilities when it comes to workplace safety. The business has the primary responsibility for the health and safety of its workers and any other workers who are influenced by the business. This responsibility is broad and overarching. This needs to be translated to workplace specific policy, as there will be different hazards in each business.
In practice, the employer must perform the following:
- Provide and maintain a work environment that is without risks to health and safety. This includes the physical and psychological work environment.
- Provide and maintain safe plant and structures. This includes machinery, tools, and buildings.
- Provide and maintain safe systems of work. This includes examining the processes of work and reviewing them regularly.
- Provide any information, training, instructions, or supervision that is necessary to protect all persons from risks to their health and safety arising from the work of your business.
- Monitor the health of workers and the conditions at the workplace for the purpose of preventing injury or illness of workers when doing work for your business.
The employee also has some obligations under the Act. They must take reasonable care for their own health and safety. They must also cooperate and comply with the safety policy of the business.
The inspector can impose a fine on businesses or employees for breaching their duties. These fines can be very substantial but will depend what duty has been breached. Here are a few examples of the most serious offences with their maximum penalties:
Express and implied contractual terms
Section 4 of the ER Act imposes an implied term of good faith in an employment agreement, similar to other common law countries like Singapore and Malaysia. Therefore, any actions the ER Act or a relevant court deem to be done in bad faith can be subject to an actionable remedy.
This obligation to act in good faith is fundamental and governs all aspects of the employment relationship. This obligation attaches to both employee and employer, and even includes being responsive and communicative. The aim is to create a mutual obligation of trust and confidence. A party should not do anything to mislead the other party. Good faith is a significant factor that a court or tribunal looks at if the dispute reaches such a level. Courts and tribunals will assess the conflict as a whole and ascertain if both parties have acted in good faith throughout the dispute. Good faith is an important factor when awarding fines and/or compensation.
Normal practices in the workplace and industry customs are enforceable implied terms in a contract. These are specific to each workplace and industry, and require an understanding of the industry practice and the case law surrounding it.
Labor inspectors
Labor inspectors are employed by the Ministry of Business, Innovation and Employment (MBIE). By investigating breaches of rights guaranteed in the preceding Acts under s223 and by enforcing the Act's provisions, inspectors ensure employers comply with their legal obligations.
They investigate compliance in breaches related to the following:
- Minimum wage
- Annual leave and holiday pay
- Record keeping obligations
- Wage deductions
- Adequate breaks, breastfeeding facilities, and parental leave
If an employer is found to be in breach of any of the minimum right entitlements, inspectors' main powers in relation to the breach are to issue an employer with a compliance order, a compensation order, and/or various penalties depending on the breach. For a breach of record-keeping obligations, a penalty of up to $1,000 may be given; whereas for a breach of the minimum rights entitlements, the penalty can be up to $50,000 against an individual; or for companies, the greater of $100,000 or three times the financial gain made by the company.
An employee or any other person aware of any breaches may refer a problem to a labor inspector at any time. In practice, however, a Labor inspector is only brought in for serious breaches. Parties should try resolve the dispute before involving an inspector; involving a Labor inspector is often only used as a threat.
Duty to create workplace policies and procedures in New Zealand
Legal obligation to create workplace policies and procedures
Unlike Japan, there is no requirement imposed by law to create workplace policies and procedures in New Zealand. This is because every employment relationship requires a contract between the employer and employee.
However, while it is not mandatory, it is standard practice to create workplace policies and procedures. MBIE strongly recommends that employers put in place workplace policies and procedures to provide some guidance and clarity in the employment relationship and assist employers with complying with relevant laws and regulations. Dismissal and redundancy procedures, as well as steps to take for disciplinary action and issuing warnings, should be included. They also recommend unwritten customs and practices in the workplace should be written down for employees to follow.
It is standard practice to bring attention to workplace policies and procedures in the employment contract, which states that the employee must follow such documentation. If such a document were to be inaccessible, there would be issues enforcing the provisions of such a document when it comes to disciplinary action or when the company seeks to dismiss an employee. If there exists a written workplace code, it is highly recommended this is printed and given to employees.
Overview of the wage system (bonuses, retirement benefits, and overtime pay) in New Zealand
Definition of salary and wages
In New Zealand, payment to employees for work done can be done in wages or salary. Salary is yearly income, and wages are paid per hour of work. Wages are defined in the Wages Protection Act 1983 as "salary or wages; and includes time and piece wages, overtime, bonus, or other special payments agreed to be paid to a worker for the performance of service or work; and also includes any part of any wages." By definition, it does not include transportation, insurance, accommodations, or any other costs that are to be borne by the employee.
Minimum Wage
The government sets and reviews the minimum wage under the Minimum Wage Act each year. The minimum wage applies to all employees aged over 16, whether full-time, part-time, fixed-term, casual, or employees who work from home and whether they are paid by wage, salary, or commission.
The current minimum wage rate (before tax) applied to employees aged 16 years or older since April 1, 2023, is $22.70, which has been increased from the previous $21.20. The current minimum wage (before tax) applied to starting-out and trainee workers since April 1, 2023, is $18.16. From 1 April 2024, the minimum wage rate will increase to $23.15 for employees aged 16 years or older and to $18.52 for starting-out and trainee workers.
Adult minimum wage applies to all employees aged 16 years or older who are not starting-out workers or trainees.
Starting-out wages apply to workers under the age of 20 and can only last for six months and are subject to a number of limitations,
The training minimum wage applies to employees over the age of 20 who are completing recognized industry training; this usually applies to trade related employment.
There is no minimum wage for employees under the age of 16, but all other employment rights and entitlements still apply.
Payment method
The Wage Protection Act 1983 specifies that employees must be paid in monetary form unless agreed otherwise in writing. If payment is to be done through internet banking or otherwise, it is standard practice to have it in the employment agreement.
Payment to an employee must be made on the agreed day. There is no requirement in the law as to how often the employee should be paid, and this can vary across industries as monthly, fortnightly, or weekly.
To pay the correct amount to the employee and make appropriate deductions, the employer needs to know the employee's IRD number and Kiwisaver information.
Wages Protection Act 1983 further protects the employee by stating that the employer cannot make deductions from an employee's wages without written consent. The employer also cannot stipulate how the employee spends their wages. It is common for deductions to be made from the wages of migrant workers in the name of accommodation costs; these kinds of deductions are illegal and are targeted under the Act.
Overtime pay
If employees are required to work outside their normal hours, employers must at least their standard hourly rate as an overtime pay. Unlike Japan, there is no set rate that an employer is required to pay, but in any event, it cannot be less than the normal amount the employee is paid per hour.
It is common practice for employers to offer time and a half (1.5 times) or double pay for overtime work, but this is not required by law. Whether the pay will be paid separately or together with the salary is also to be decided in each individual employment agreement.
Payment and time records
Employers have an obligation to record the time employees have worked as well as how much they are paid, together with Kiwisaver deductions made from the payment. This new requirement came about as a result of mass immigrant worker exploitation. It ensures that employers are complying with the law and gives employees the minimum entitlements guaranteed by law. Employees can request to see these records at any time.
The record keeping requirement for pay records is seven years, even if the relevant employee has left the employer. Record keeping can be recorded electronically or on paper.
Penalties for not meeting minimum wage and bookkeeping requirements
If an employer breaches the Minimum Wage Act or the Wages Protection Act and is found to have paid employees less than what is required by law, they may subject to a penalty from a labor inspector. Depending on the nature and the seriousness of the breach, for instance, whether it was a one-off mistake or repeated exploitation of vulnerable workers, it can vary from an improvement notice or a fine to having the business removed from the marketplace. As stated above in Part 2, fines can be up to $50,000 against an individual, or for companies, the greater of $100,000 or three times the financial gain made by the company (in relation to the breach).
Equal Pay Act
The Equal Pay Act requires employers to pay the same amount of compensation to men and women doing the same work or substantially similar work. However, in determining whether there is a gender pay gap in female-dominated occupations, the requirement is to look to what men would be paid to do the same kind of work, looking at skills, responsibility, and effort required for that job. A personal grievance claim can be made by an employee if the employer does not comply with the requirement of equal pay.
The Equal Pay Amendment Act 2020 came into force on November 6 2020, which allows employees to make a pay equity claim via the existing employment relations bargaining framework. This lowered the bar for employees initiating the claim without the need to go through a court process.
Noncompliance with this Act will likely mean the employer has also breached the Human Rights Act and can therefore be brought before the Human Rights Review Commission.
Methods and points to consider regarding dismissal in New Zealand
Dismissals
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Methods of terminating an employment relationship
There are several ways to terminate an employment relationship in New Zealand. Each method requires a different procedure and must meet certain conditions and criteria. Terminations include resignation, retirement, dismissal, redundancy, and constructive dismissal.
For dismissals as a result of serious misconduct or redundancy, there are strict procedural and substantive requirements that need to be followed.
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Notice requirements
The law requires that fair and reasonable notice be given when dismissing an employee. It does not specify a specific notice period, but it is standard for it to be specified in each individual employment contract. If there is no notice period in the contract, two to four weeks is standard practice and is considered fair and reasonable in New Zealand. An employer and employee is free to waive the notice period and cease the employment relationship immediately if they wish.
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Dismissal in general
The employer must have a legitimate reason to dismiss an employee lawfully. These are as follows:
- Repeated misconduct or one-off serious misconduct;
- Performance issues, despite repetitive warnings and notices;
- The ending of a 90-day trial period and the employee has proven to be unsuited for the role
- Incapacity
- Very rarely, for incompatibility
When dismissing an employee, the implied term of good faith in the employment contract becomes of paramount importance.
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Dismissal for Misconduct
An employer can dismiss an employee for misconduct or serious misconduct. Misconduct includes absence from work, not wearing appropriate work attire, absenteeism, taking unauthorized leave, using offensive language, and sending offensive emails. General misconduct will require notices and warnings being served prior to dismissing the employee.
Serious misconduct could be breaching work rules in relation to drugs and alcohol during work hours, disclosure of the company's confidential information, dishonesty, direct disobedience, and insubordination, which can warrant an on-the-spot summary dismissal. Serious misconduct could be turning up to work intoxicated, which can warrant an on-the-spot summary dismissal.
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Procedure
To prove substantive fairness, the reason behind the dismissal must be fair. For this, the employer must prove that the misconduct actually existed and that it was serious enough to warrant termination of the employment agreement. It will need to be proven that the misconduct deeply impaired the confidence and trust of the employment relationship.
Even if the misconduct did exist and it is serious enough to warrant a dismissal, if the employer does not follow the correct procedure, they may be subject to a personal grievance claim from the employee.
To meet the required standard of procedural fairness, the employer must take the following steps:
- Give notice of the employer's intention to dismiss the employee. This includes giving written notice of the allegations that have been made and what the potential disciplinary action could be. The employer must give reasonable time to the employee to mount a defense, and the right to bring a support person to such meeting where the employee will be disciplined. Disciplinary procedures should be outlined in the employment contract, as well as in the employer's workplace policies and procedures if there is one.
- Properly investigate the alleged misconduct by the employee.
- Give the employee an opportunity to be heard as well as to allow a support person at a meeting prior to being dismissed. The employee should be shown the evidence and if the employee provides new information an employer should investigate.
- The employer must give an unbiased consideration of the explanation the employee gives. The decision must be one that a fair and reasonable employer could take. This means the employer needs to consider what other options are available, and the ultimate decision to dismiss the employee must be one that is a reasonable option given the alternatives.
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Dismissal for Serious Misconduct: (Case law Hudson)
New Zealand case law has created the precedent that when dismissing an employee for serious misconduct, the employer does not have to prove the incident happened per se, but it must show that they carried out a full and fair investigation which lead the employer to believe the serious misconduct occurred. The employee must be given a proper opportunity to respond and be given timely notice of the alleged misconduct. The alleged serious misconduct must interfere with or prejudice the safe and proper conduct of the employer's business to be able to be considered as serious misconduct. Therefore, the key point in dismissing an employee is ensuring that the alleged misconduct was given a proper investigation.
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Performance related dismissals
Dismissing an employee for poor performance is difficult, so extra care should be given. The following procedural steps need to be taken:
- If the employer has become dissatisfied with the employee's conduct, the employer must check whether there is any procedure in the employment agreement and confirm what is expected of the employee in the employment agreement.
- This dissatisfaction needs to be expressed to the employee, orally or in writing.
- The employee needs to be given a reasonable opportunity to improve and be provided extra training if needed. Appropriate warnings need to be given is an employee is still not improving; furthermore, this step must be repeated.
- Dismissal needs to be what a fair and reasonable employer could have done.
Redundancy
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Redundancy
An employee can be made redundant if the position in the company is no longer required. For redundancy, the important aspect is the genuineness of the redundancy. If an employer terminates employment by making an employee redundant, but then hires a new employee to that position, the redundancy is not genuine. In such case, the employee can have a personal grievance claim against the employer.
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Procedure
To meet the required standard of procedural fairness, the employer must take the following steps:
- Give reasonable notice (usually one month) to employees that the company is changing its corporate structure.
- Consult the employees with an open-mind before making redundancy decisions and ask for their contributions.
- Disclose the relevant selection criteria to all the relevant employees.
- Alternatives to redundancy need to be discussed between the company and all employees potentially subject to being made redundant. The alternatives are reappointment, retraining, redundancy, and voluntary redundancy.
To prove the substantive fairness of the redundancy, the employer needs to prove that the position is no longer required in the company: it cannot be that the specific person is no longer required. There needs to be genuine commercial reasons for letting an employee go. For instance, the company trying to save money is seen as a legitimate reason. The key point in making an employee redundant is therefore the genuineness of the redundancy. This provision is very employee friendly.
Resignation
Resignation is simpler in the sense the employee has the right to resign if they follow the relevant notice requirements. Once the employer accepts the notice of intention to resign, the employee may resign after the notice period has passed.
Retirement
There is no set age for retirement in New Zealand. However, because Kiwisaver and superannuation entitlements are available at age 65, it is common for employees to retire when they turn 65. In calculating a retiring employee's final pay, superannuation calculations must be included if the account is held with the employer.
It is also prohibited by law to discriminate by age and force an employee to retire at a certain age. There are some exceptions in certain industries, such as pilots, judges, and coroners. Forced retirement is subject to a personal grievance claim.
Compensation for termination
Unlike in many other jurisdictions, there are no hard and fast rules on how much compensation should be paid to employees being dismissed. It depends on what has been decided between the employer and employee in each employment agreement. However, it should be noted that the obligation of good faith in section 4 underpins any decision of how much compensation needs to be paid. Standard practice in New Zealand is to give two weeks' wages to support the employee in finding a new job.
Protection of Employees
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Personal grievance claims
If the employee considers that they have been unfairly dismissed, they can raise a personal grievance claim against the employer; this must be done within 90 days and can be done orally or in writing. If an employee raises a personal grievance claim outside of this timeframe, and the employer does not agree to an extension, they will be unable to have their claim determined by the ERA or the court unless there are exceptional circumstances. If a personal grievance claim is raised, the first step is to resolve the matter internally or engage in mediation. Matters that are not resolved are then referred to the ERA and finally to the Employment Court.
While the employee on probationary periods is entitled to a personal grievance of unjustified dismissal, the employee on 90-day trial periods is immune to this right.
In addition, the employee can raise a personal grievance claim on a triangular employment relationship under the Employment Relations (Triangular Employment) Amendment Act 2019, which came into force on June 28, 2020. Triangular employment is a relationship between employees where the employee works for a third party (e.g. labor-for-hire, secondment). This amendment enables triangular employees to raise a personal grievance not only against the employer but also against the controlling third party.
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Additional protection when a business is sold or work is transferred or contracted out
All employment contracts must have an employee protection provision for when their employer's business is being restructured as a result of being sold or work is transferred or contracted out. When restructuring the company, an employer must follow the procedures set forth in the employment contract. An employer cannot restructure their business without having this protection clause.
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Protection of vulnerable workers during restructuring
The ER Act protects certain classes of workers, mainly in the catering and cleaning industries, from being easily dismissed or being made redundant. A full list of this class of vulnerable workers is found in Schedule 1A of the ER Act.2
If an employee works in one of these industries, the employee can elect to have the same terms and conditions transferred to a new employer regardless of the size of the employer.
If an employee is made redundant after being transferred, the employee is entitled to compensation from the new employer.
Mediation
The ER Act places a lot importance on mediation. If a dispute arises and the parties cannot come to a resolution on their own, they should go to mediation before going to the Employment Court. The Court gives priority to parties that have already attempted mediation. Courts will often make parties attempt mediation before they will hear a case.
The Ministry of Business, Innovation and Employment provides a free mediation service for any employer or employee with an employment relationship problem.
Types of foreign national visas and acquisition requirements
Types of work visas
There are multiple types of visas available to foreign nationals intending to work or to look for work in New Zealand. These visas are categorized according to the nationalities, professions, skills, and other status of the applicants. In most instances, the applicant must have a job offer from an employer in New Zealand, and the applicant's profession must be on the skill shortage list issued by the government. Jobs that are in the most demand are in the IT, construction, engineering, scientific and medical sectors, which Japanese nationals could apply for and obtain a visa.
There was previously the skill shortage list (such as the Long-Term Skill Shortage List, Immediate Skill Shortage List, and Canterbury Skill Shortage List), which has now been replaced by the Green List of highly skilled roles that are in shortage in New Zealand and has registration, qualification, or experience requirements.3 Further, migrants with professions listed under the Green List have a clear pathway to residence in New Zealand.
There has been a recent change to the main temporary work visa in New Zealand, Accredited Employer Work Visa (AEWV). From 27 November 2023, the concept of a maximum continuous stay was introduced for an AEWV holder, which is five years for people paid at or above the median wage (currently NZD $29.66). The maximum visa length of the AEWV was also increased to five years for those who earn at least the median wage.
A full list of visas can be found on Immigration New Zealand's website.4
