Avoid common mistakes when employing summer staff
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:
• Fixed-term employment agreements, and
• Casual employment agreements.
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
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.
Holidays and annual leave
Public holidays can cause headaches for employers who hire temporary workers over the summer. An employee who works on a public holiday is entitled to be paid time-and-a-half regardless of what kind of employment agreement they have. Employers can, however, get tripped up in understanding where:
• They don’t pay their employee for a public holiday that person did not work and they were entitled to be paid for that day, or
• They don’t give their employee who did work on a public holiday an alternative day off and they were entitled to that day off.
Any employee who does not work on a public holiday is entitled to be paid for that day if that holiday falls on a day which would otherwise be a working day for that employee. If, for example, Waitangi Day falls on a Monday, you must assess whether that Monday is a working day for each of your employees.
If your employee does work on a public holiday and that holiday falls on a working day, your employee is entitled to time-and-a-half and an alternative holiday. An alternative holiday means a paid day off work on a day which would be a working day for your employee.
A great deal turns on the definition of ’otherwise working day’ and the Holidays Act 2003 is unhelpful. The Act, however, provides some guidance when determining ‘an otherwise working day’, including an employee’s employment agreement and work patterns.
For full-time employees with regular days of work, this assessment will usually be straightforward as their normal days of work are specified in their employment agreements and they have an established pattern of work those days.
Where this assessment can become difficult is for employees whose days of work vary over the summer months. For example, part-time employees may regularly pick up extra shifts and casual employees may work a variety of days. While these people’s employment agreements may not specify that they work on Mondays, nevertheless they may have developed a pattern of working on Mondays, thereby entitling them to an alternative day off. When assessing your employee’s pattern of work, a rule of thumb we often give clients is to review your employee’s previous six weeks of work. If they have worked a Monday on at least five of those weeks, this would strongly suggest your employee has a pattern of working on a Monday.
With summer almost upon us, make sure you’re prepared with employment agreements that are appropriate for your seasonal needs. Happy summer trading!