Casual or Fixed Term?

2020 has been a year of upheaval for employers.  Now many employers are looking for different ways to employ staff where their requirements have changed.  

The most common employee is a permanent employee. A permanent employee has ongoing employment and receives all minimum entitlements (for example, holiday pay and sick leave), however sometimes such an arrangement is not always suitable. Employers may want to employ someone for a short period of time or only require someone on a casual basis. When deciding on the status of an employee it is crucial for employers to get it right, as getting it wrong can be costly.

FIXED TERM EMPLOYMENT AGREEMENT

An employee may be employed for a limited time (fixed term) however there are specific requirements for such an arrangement. The Employment Relations Act 2000 (the Act) specifies that a fixed term employment agreement is only valid where:

• The Employer has genuine reasons based on reasonable grounds for limiting the employment to a fixed period; and

• Those reasons and the way in which the employment will end, must be clearly set out in the employment agreement.

What is a Genuine Reason?

The Act specifies that it is not a genuine reason if the purpose of the fixed term is:

• to exclude or limit the rights of the employee under the Act;

• to establish the suitability of the employee for permanent employment;

• to exclude or limit the rights of an employee under the Holidays Act 2003.

Reasons such as working on a specific project, or covering an absent employee (for example to cover parental leave) are likely to qualify as genuine reasons.

Annual Leave

If an employee is employed on a genuine fixed term employment agreement for less than 12 months, they can agree to be paid 8% of their gross earnings with their regular pay. If the agreement is for 12 months or more, the employee will become entitled to four weeks' paid holidays after 12 months of employment (the same as a permanent employee).

What can go Wrong?

Fixed term agreements need to be carefully managed. If the requirements set out in the Act are not complied with, or the fixed term agreement is continually rolled over and the employee challenges the termination of their employment, the employer may not be able to rely on the agreement being fixed term. There may be a dispute that the employment is permanent, rather than fixed.

CASUAL EMPLOYEE

A casual employee is one who is engaged to work as and when required, and has no regular hours. Typically casual employees have no guarantee or expectation of work and are called on, when and as required.

Broadly, a casual employee's work is intermittent and they will be employed for short periods/engagements, as compared to a fixed term employee who will be working for a fixed period of time.  

Annual Leave

An employer can agree with a casual employee that they will be paid 8% of their gross earnings as annual holiday pay at the end of each engagement or on a pay-as-you-go basis.

What can go Wrong?

A casual arrangement can become complex if a casual employee works a full week on a regular basis or if there is a regular pattern of work. In this circumstance, there is a real risk that the casual employee is no longer a casual but instead, has become a permanent employee, which can have termination implications.

Take Home Tips

• Consider the type of business you have, and the need required.

• Is there a project, or is there ongoing work?

• Always ensure you have an employment agreement in place.

We can assist you with the decision as to whether you need a casual or permanent employee and ensure you make the right decision.

Please direct any enquiries to:

Melissa Johnston (Partner) on (09) 306 6729 (mjohnston@mcveaghfleming.co.nz)

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Employment Law

Contract Law