Entry A1 v1 — Employment agreement essentials

What to watch for

Six places the agreement gets shaped wrong, most of which the Builder hands you as a choice without flagging the consequence.

1. "Probation period" and "trial period" are not the same thing. The 90-day trial period is a statutory mechanism under section 67A — if it's valid and you dismiss inside it, the employee can't raise an unjustified-dismissal personal grievance. A probationary period is a contractual label with no statutory definition; you can use one, but ending it requires the standard dismissal process (genuine reason, fair procedure, opportunity to respond). If your agreement says "probationary period" instead of "trial period," you don't have a trial period. The Builder uses the statutory term; templates from accountants and friends often don't. See the entry on 90-day trial periods for what makes a trial period valid.

2. "Overtime as required" is an availability provision. It needs guaranteed hours, a real reason, and reasonable compensation. This is the most-often-broken rule and the one most templates get wrong. Section 67D is precise: a clause requiring the employee to work additional hours when needed is, legally, an availability provision. To be enforceable, the agreement must specify guaranteed hours, the employer must have genuine reasons for the availability requirement, and the agreement must provide reasonable compensation for being available.¹ For salaried employees, the compensation can be embedded in salary — but only if the agreement says so explicitly. The default assumption that "salary covers it" was rejected by the Employment Court in Postal Workers Union v NZ Post [2019] and again in NZDF v Williams [2024]. The Builder doesn't surface this as a separate decision; check what your hours-of-work clause actually says and whether you have an "as required" tail on it.

3. Restraint of trade is enforceable but only when it's reasonable. And the rules may be changing. Current law: a restraint of trade clause is enforceable if you have a legitimate proprietary interest to protect (confidential information, customer relationships, trade secrets) and the scope — geography, duration, restricted activities — is no broader than necessary. Junior employees with no customer relationships or trade secrets typically can't be restrained at all; senior employees in customer-facing roles can be, but the courts vary unreasonable restraints rather than enforce them as written.² A Bill before Parliament — the Employment Relations (Restraint of Trade) Amendment Bill — would, if passed, ban restraints below an income threshold (three times the minimum wage) and require employers to compensate higher-earning employees during the restraint period. The Bill has been awaiting second reading since 2023 with no current government commitment to advance it; treat it as "watch this space," not as the operative law. Don't include a restraint reflexively; include one when there's a real interest to protect, and scope it to the role.

4. Get the agreement type right. Casual, fixed-term, or permanent. Casual agreements are for genuinely-irregular work patterns — the employee can decline shifts, the employer isn't committed to providing them. If the work happens at predictable hours each week, it's not casual, regardless of what the agreement says. Fixed-term agreements need a genuine commercial reason — seasonal work, a specific project with a known end, parental-leave cover. Using fixed-term to "try someone out" isn't a genuine reason; trial periods exist for that purpose. Permanent is the default. A mismatch between agreement type and the actual working pattern is the most common reclassification trigger and exposes you to backpay, holiday pay, and personal grievance.

5. Specifying hours of work tightly is a trade-off, not a default. "40 hours per week, Monday to Friday 9am-5pm" commits you to those specific hours. Varying them later — moving start time, adding a Saturday, changing days — requires consultation in good faith and the employee's agreement. Specifying loosely ("40 hours per week, days and times to be agreed") gives operational flexibility but creates uncertainty about what was actually agreed and weakens your position if a dispute over hours later arises. The Builder offers both shapes; pick deliberately based on whether the role's value is the schedule or the output.

6. Don't recycle a template you got from somewhere. Templates from previous employers, accountants who haven't updated their pack since 2022, friends, or "I downloaded this from somewhere" are heterogeneous quality and frequently outdated. The most common failures: stale 90-day trial wording (the pre-Dec-2023 "fewer than 20 employees" rule), missing s 65 mandatory clauses, restraint of trade clauses that don't fit the role, no availability provision compliance. The Builder is free, official, and current — for first-time employers it's the lower-risk path. For your second or third hire, regenerate via the Builder rather than copying the first agreement; legislation changes and inherited copies drift. And note: the Crimes (Theft by an Employer) Amendment Act 2025 means failing to pay an employee what they're owed under their agreement (wages, notice-period pay, outstanding holiday pay on departure) can now be charged as theft, not just claimed civilly. The agreement document is durable; what it commits you to is durable too.

A separate point on the relationship between the Builder and this entry. The Builder generates the document; this entry is about the choices that go into the document. The two together are the operational answer for a first-time employer hiring on a permanent or fixed-term basis. The Builder is not, however, a substitute for thinking about the role itself — what work, at what hours, for what wages, with what protections, against what risks. It's the tool that takes those decisions and assembles them into a compliant document. If you arrive at the Builder without having made the decisions, the Builder will accept your defaults and you'll have a compliant document that doesn't reflect the agreement you actually meant to make. Do the thinking before you do the clicking.

The thinking pays back every hire: type, hours, restraint, the s65 clauses are the reusable part. Get them right once and the second and third hire are regenerate-and-adjust (via the Builder — legislation drifts, don't copy the old file). Treat the first as a throwaway and you re-pay the thinking, and re-carry the reclassification risk, every time.

Where this entry stops

This entry covers the strategic decisions that go into an individual employment agreement and the most-common-failure-mode discretionary clauses. It doesn't cover:

• The hiring sequence and registration as employer. See the entry on hiring your first employee.
• What makes a 90-day trial period valid. See the entry on 90-day trial periods.
• Whether you should be hiring an employee or a contractor. See the entry on contractor classification.
• Personal grievance exposure after dismissal. See the entry on personal grievance reforms.
• Workplace policies as a separate document (drug and alcohol, social media, leave management). These sit alongside the agreement, not inside it; corpus territory.
• Performance management procedure when something goes wrong. Corpus territory.

For the document itself, the Employment Agreement Builder is the tool. For deeper procedural depth on any specific clause, Employment New Zealand carries the operational detail.

Last verified 9 June 2026. Full source list: references.