With summer fast approaching, many businesses will be hiring temporary staff to meet their needs over the busy summer months. Taking on temporary staff can throw up some tricky issues. Employers often are uncertain about what employment agreement is appropriate for temporary staff and how their holiday entitlements should be met. We explore the pros and cons of different kinds of agreements for temporary employees and provide guidance on their annual leave and holiday pay entitlements.
In general, there are two types of employment agreements that can be used for temporary employees:
A fixed-term employment agreement expressly states that your worker’s employment will end either on a specific date or on completion of a particular project. Fixed-term agreements also specify your employee’s hours and days of work over this period. The Employment Relations Act 2000 prohibits employers from using fixed-term employment agreements unless there are ‘genuine reasons based on reasonable grounds’ for requiring the agreement to end in this way and these reasons must be recorded in the employment agreement. Using a fixed-term agreement as a trial for new employees is also expressly prohibited by the Act.
Annual leave entitlements in fixed-term agreements are straightforward. For a fixed-term agreement for a period of less than 12 months, your employee can be paid annual leave on a pay-as-you-go basis; they receive 8% of their gross earnings for that pay period in addition to their wages. The 8% annual leave payment must be separately identified on their payslip.
Fixed-term agreements are appropriate if you have a clear understanding of your staffing needs over the summer months and can confidently specify a date from which your employee will no longer be needed, ie: the expiry date.
Where you can run into trouble is when you allow the fixed-term agreement to roll over beyond the expiry date. By allowing the employment relationship to continue beyond the expiry date, you run the risk that your employee is deemed to have become a permanent employee and therefore their employment cannot lawfully be terminated without justification. To avoid this, you should either strictly adhere to the expiry date or ask your employee to enter into a new employment agreement for a further fixed term.
Casual employment agreements provide no guaranteed hours of work, no regular pattern of work and state that your employee has no ongoing expectation of work. Casual employees may be offered work from time-to-time but are under no obligation to accept such offers. Casual employment agreements are favoured by employers with fluctuating and unpredictable business needs.
In addition to the convenience and flexibility casual agreements give to employers, the holiday pay entitlements are relatively easy to calculate. Similar to fixed-term agreements, casual employees are paid their annual leave
on a pay-as-you-go basis.
You can get caught out with casual employment agreements if you begin to treat casual staff as permanent employees. You may have such regular and predictable work available that you forget to offer the work and your employee begins to turn up to work with the reasonable expectation that work is, and will continue to be, available. You must be very conscious of how you allocate work to your casual employees to ensure you don’t inadvertently create a permanent employment relationship.
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