A guide to choosing the right type of employment relationship

Choosing the right type of employment relationship is essential to putting a good employment agreement in place. Angela Millward looks at the different types of employment relationships - permanent, fixed term and casual. 

It is important that employers select the right type of employment relationship right from the start. Legally all employees must have a written employment agreement, irrespective of the type of employment.

There are three types of employment relationships:

1. Permanent (can be part-time or full-time)
2. Fixed term
3. Casual

Selecting the right type of relationship will mean the correct employment agreement is put in place. Getting this wrong could result in problems down the track. You can't just rely on what the employment agreement says. In the worst case scenario the court will examine the real nature of the relationship and all relevant matters, including any matters that indicate the intentions of the parties.

Here’s a quick guide to the three types of employment relationships. More information can be found on the Employment New Zealand website. 

Permanent employee

• Employed for an indefinite period.
• Can be full or part-time.
• Regular, predictable work patterns.
• Employed until the employee resigns or is dismissed (including redundancy).
• Must be paid annual holiday pay when they take annual leave.
• Must be paid sick and bereavement leave after six months’ continuous employment.

Fixed term employee

• Employee agrees to temporary employment which ends upon expiry of a fixed term (i.e. date, period, or event).
• The nature of the fixed term must be based on genuine reasons based on reasonable grounds. The agreement must state how employment will end and why.
• The existence of the dairy season is not a genuine reason.
• The agreement must include the actual reason and include specific details by way of background to ensure the criteria are met. For example, extra assistance over calving, covering an employee on extended sick leave, or covering an employee on parental leave.

Casual employee

• A true casual employee is an individual that has no ongoing expectation of employment with their employer.
• In this case there is no guarantee of work from one offer of employment to the next. Additional work is offered on an “as and when required” basis. The employee could as easily accept or decline the offer of work.
• Casual employees are often engaged for short periods of time for specific purposes. For example, filling in to work when a permanent employee is ill, or covering an employee on annual leave.
• Their work is so intermittent and irregular that it is impractical to apply four weeks’ annual leave.
• Employers are required to pay 8 per cent holiday pay with the employee’s wages, but this must be shown as a separated detail on the payslip.
• Employers can make their remuneration (rate of pay) inclusive of holiday pay IF it is outlined in their employment agreement AND it does not fall below minimum wage. If the employee receives a payslip this needs to be clearly identifiable.
• Keep an eye on the engagements to ensure it doesn’t evolve into a part-time permanent relationship with an ongoing expectation of work.