Many PaySauce customers are those who work in industries which often make use of casual employees. Our collective decades of experience in payroll here at PaySauce has repeatedly shown us that casual employment arrangements are often incorrectly used and not well understood, particularly with regard to leave entitlements. Let’s dive in and cover everything you need to know about casual employees, when this arrangement is appropriate and what they are entitled to.
What is a casual employment arrangement?
There are three distinct employment types in New Zealand: permanent, fixed term and casual.
These are used for different reasons, and the primary purpose of a casual arrangement is flexibility for both the employer and employee in terms of availability and ongoing work.
Casual employees are typically engaged on an as-needed basis, often with very irregular or intermittent hours. Employers are not required to offer ongoing work, and casual employees are not obliged to accept every offer of work.
Key features of casual employment
- Employers can offer shifts as needed, and employees can choose whether or not to accept them.
- Casual employees must have a written employment agreement, just like any other staff member. This agreement should outline the nature of the casual arrangement, including the types of work, expected hours, and pay.
- Casual work is not regular or rostered. If a pattern of regular work develops, the arrangement may need to be reviewed, and the employee could be considered permanent (regardless of whether or not you change the contracted terms).
Rights and entitlements for casual employees
Casual employees in New Zealand have most of the same minimum rights as permanent employees, including:
- Annual leave: Casual workers are entitled to annual leave. Because their hours are irregular, employers can agree to pay 8% holiday pay on top of wages each pay period, instead of accruing annual leave.
- Sick and bereavement leave: After six months of continuous employment (meeting certain minimum hours and work pattern requirements), casual employees are entitled to paid sick leave and bereavement leave.
- Public holidays: casual employees may still be entitled to be paid for public holidays not worked or receive an alternative public holiday depending on their work pattern (more below).
- Other leave: Casual employees may also be eligible for other statutory leave types, such as family violence leave, depending on their work history and hours.
- Minimum wage: All casual employees must be paid at least the minimum wage for every hour worked.
- KiwiSaver: Casual employees are still entitled to receive employer KiwiSaver contributions if they are opted in. They are exempt from automatic enrolment criteria but if they have opted in, they’re in and still entitled to the same contributions as a permanent employee.
If you agree with your employee to pay their annual leave entitlement using the ‘pay as you go’ method, where 8% of their gross earnings is added to each pay to cover their annual leave entitlement, this must be:
- Agreed in the employment agreement
- Shown as a separate pay component on the employee’s pay records and payslip (i.e. you must pay their contracted rate and 8% separately, not combine them both into the hourly rate).
Public holidays are an area that can be particularly tricky to understand for casual employees. That is because the status of their employment (casual) doesn’t actually prevent them from receiving certain entitlements, but the intent of casual employment is that there is no regular work pattern. Some public holiday entitlements directly relate to a day being an ‘expected’ day of work which directly conflicts with the intended nature of casual employment.
If your casual employee works on a public holiday, they are entitled to be paid time and a half for the time worked.
If the public holiday was an ‘otherwise working day’ for your employee, even if they are casual, they are entitled to an alternative public holiday for the day if they worked or to be paid if they had the day off.
You can refer to Employment NZ’s guidance on otherwise working days here: Otherwise working days
What should you keep in mind when using casual employment agreements?
- Avoid misclassifying: Simply labeling an agreement as "casual" does not make it so. If an employee is working regular hours or is rostered consistently, they may legally be considered permanent, regardless of the contract. The Employment Relations Authority can look beyond the agreement’s label and consider the actual working pattern.
- Minimum rights and protections: Casual employees are entitled to the minimum wage, paid rest and meal breaks, and (after qualifying) sick and bereavement leave. Employers must also provide a safe workplace and comply with health and safety obligations.
- Lawful ending of arrangement: Ending a casual arrangement must still be fair and lawful. If an employee has accepted a shift, they have the same protections as other employees for that shift, and cannot have it cancelled last minute without proper cause or compensation. Unfairly ceasing to offer work or dismissing a casual employee can lead to personal grievance claims.
- Review the relationship regularly: Employers should regularly review the actual work patterns of casual employees. If the nature of the work changes, consider moving the employee to a permanent or fixed-term agreement to ensure compliance and avoid legal risk.
For further guidance, consult the official Employment New Zealand website or seek legal advice to ensure compliance with current employment laws. We highly recommend the eLearning modules available for employers from Employment NZ. Check them out here: https://employment.elearning.ac.nz/
We also highly recommend that you use the Employment NZ Employment Agreement builder (or contracts specifically designed for your business and reviewed by a legal or employment professional). The Employment Agreement Builder will help you build an appropriate casual agreement including mandatory clauses for you.
Employment NZ Employment Agreement Builder
As always, the information provided in this blog post is for general informational purposes only and does not constitute legal advice. Employment laws and regulations can change, and individual circumstances may vary. For advice specific to your situation, please consult a qualified legal professional or employment advisor.
