A conversation with a friend recently prompted me to reflect on how minimum working hours in employment agreements are still so poorly understood by many employers.
Here at PaySauce, we specifically aim to help smaller businesses with their payroll. We know that lots of our customers don’t have HR teams and are often trying to juggle employment compliance alongside everything else it takes to run a business, so we’re often receiving lots of questions about legal obligations - including contracted hours for employees.
Let’s cover off some information about contracted hours, availability clauses and shift cancellation to demystify some of the requirements.
What are zero hour contracts and why are they illegal?
Zero hour contracts refer to employment agreements where an employee has no guaranteed hours of work but is required to be available whenever the employer needs them. Employees under such contracts often cannot refuse work and are not compensated for being on standby.
In 2016, New Zealand’s employment laws were updated to prohibit zero hour contracts. The government aimed to stop unfair employment practices where workers were expected to be available without any guarantee of work or pay.
Key reasons zero hour contracts are not legal:
- Employees in New Zealand must have some guaranteed hours in their contract (the exception being casual employees, which I’ll cover below).
- Employers cannot require employees to be available outside their guaranteed hours unless they are compensated for it.
The law ensures employees know when and how much they will work, providing stability and security for both parties.
What must be in the employment agreement with regards to how the employee will work?
Every employment agreement in New Zealand (except for true casual arrangements) must clearly state:
- The number of guaranteed hours of work.
- The days of the week the employee will work.
- The start and finish times for each shift (or how these will be set).
- Any flexibility in these arrangements.
If hours are agreed verbally, they must still be put in writing. Employers who fail to include these details can face penalties.
What about a maximum number of hours?
The default maximum for ordinary hours in New Zealand is 40 hours per week, typically spread over no more than five days.
Employers and employees can agree to a higher number of ordinary hours, but this must be explicitly stated in the employment agreement.
While the law sets a weekly maximum, there is no strict statutory limit on the number of hours that can be worked in a single day, except for specific industries where safety regulations may apply.
This standard is set by the Employment Relations Act 2000 and the Minimum Wage Act 1983, which require that employment agreements specify a maximum of 40 hours per week unless otherwise agreed.
Any hours worked above the agreed ordinary hours are considered overtime. There is no statutory requirement for an overtime pay rate in New Zealand, but if overtime rates are agreed upon, they must be included in the employment agreement and are legally binding.
Employers have a duty of care under health and safety laws to ensure employees are not working unsafe or excessive hours.
Availability clauses
While zero hour contracts are not legal, the law allows for availability clauses in certain situations. These clauses let employers require employees to be available for extra hours beyond their guaranteed minimum: but only under strict conditions.
- The employer must have genuine, reasonable grounds for needing the employee to be available (e.g., unpredictable business demand)
- The contract must specify guaranteed hours of work. Availability requirements can only apply to hours above this minimum.
- Employees must receive extra pay for making themselves available beyond their guaranteed hours. What counts as “reasonable” depends on factors like the number of hours, restrictions placed on the employee, and their normal pay rate.
- If there is no valid availability clause, employees can refuse to work extra hours, and employers cannot penalise them for this.
What about casual employment?
Casual employees are not guaranteed any hours, but they can decline work when offered. This is fundamentally different from zero hour contracts, where employees must be available and cannot refuse work.
We know that employers and employees still poorly understand casual employment arrangements, and these contracts are often used incorrectly. We’ll save that for another post!
Shift cancellation
Shift cancellation is another topic that isn’t well understood and can be hard to apply, given the liberal use of the word ‘reasonable’ in New Zealand employment law.
The employment agreement must include:
- A reasonable period of notice that will be given before a shift is cancelled.
- Reasonable compensation to be paid if the employer cancels a shift without giving the specified notice.
If the agreement does not have these provisions, and a shift is cancelled, the employee must be paid as if they had worked the shift.
The law does not set a fixed notice period; instead, what is “reasonable” depends on several factors:
- The nature of the employer’s business, including whether the employer could foresee or control the reason for cancellation.
- The nature of the employee’s work and the likely impact of cancellation on them.
- The employee’s employment arrangements.
Notice must always be given before the shift starts. Cancelling at the start of, or during, a shift is not considered reasonable notice, and the employee must be paid for the full shift. If the required notice is not given, the employer must pay reasonable compensation. This is determined by:
- The amount the employee would have earned for the shift.
- Any costs the employee may have incurred preparing for the shift.
- The period of notice that should have been given.
Compensation must reflect the loss to the employee, and if the agreement is silent on compensation, the default is full pay for the cancelled shift.
These requirements are set out in the Employment Relations Act 2000, section 67G.
.png)
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 highlight mandatory clauses for you, ensuring that you won’t be missing key information in your agreement which could lead to penalties 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.
