1. To define employment relations and describe how it operates across all levels of business and a range of disciplines
  2. To identify the major participants in employment relations
  3. To show how the balance between collective and individual employment agreements and rights has changed over time
  4. To examine the core principle and content of employment agreements, including the distinction between employees and contractors
  5. To highlight how the roles of the Employment Institutions and legal precedent have influenced the practical application of employment relations changes


Most of us are either employed in paid or unpaid work, or employ people ourselves and, therefore, have some understanding of what employment means. Employment relations are often described as the interaction between three major groups: employers, employees, and the government. But it is more than this; employment relations are dynamic and complex and what occurs in the workplace is influenced by the wider society. Governments change employment laws from time to time, and courts interpret these laws when they rule on cases. This creates precedents – new understandings about the application of law, which essentially become new laws.

Rapid technological change has resulted in both a change in the type of jobs available, and the way that work is done. The ‘future of work’ has become a catch cry and is often associated with very positive or negative predictions about job opportunities or disappearance of jobs (see discussion in Chapter 6). Some of these changes are already detectable. Thus, the ‘standard employment relationship’ – an assumption that work is full time, stable, with set hours and unionised – is no longer the case for most New Zealanders. Many people work part time or long hours and job and income insecurity appear on the rise. Technology is disrupting boundaries between work and leisure, something that has become pronounced after the Covid-19 pandemic in 2020. Businesses often want the flexibility of longer operating hours and variable staff rosters and can use contracting models to better control wage and salary costs. Thus, many people work as contractors and contracting has become dominant in certain industries and occupations. Recently, contractors have started to provide services administered by various web-based platforms as part of the ‘gig economy’.

Overall, there are many influences beyond the local and national labour markets. Workers in New Zealand compete in globalised job markets as firms outsource production to countries with lower labour costs. Furthermore, government policies facilitate immigration and emigration, allowing the New Zealand workforce and its skill and education makeup to change faster than it would without international labour mobility.

This chapter defines ‘employment relations’, the different levels of employment relations and it examines the key ‘actors’ who influence employment relations. The chapter also overviews the basic elements of an employment agreement and will in subsequent chapters deal with historical and current changes to the employment agreement itself and to its key components such as pay, hours, leave and dispute resolution. The chapter will also highlight the distinction between employees and contractors and why this distinction came to be of great importance. Finally, we focus on employment institutions which deals with disagreements over employment agreements and disputes in workplaces. As there has been rapid change to employment relations – including an expansion of employee rights and less collective bargaining coverage – there has been considerable focus on court-based employment decisions.

Finally, there are major disagreements about core employment relations issues and how to interpret the above-mentioned changes and influences. How we view employment relations is contentious as we each have our own outlook (or perspective) based on our individual set of beliefs and values (as discussed in Chapter 2). Often, we tend to align ourselves with those who share our views and the various perspectives can be found in disagreements between the key parties in employment relations as well as political decisions on legislative frameworks and employee rights (see Chapters 3, 4 and 5).

What are employment relations?

The definition of employment relations has broadened over time and is still evolving. The subject of employment relations has developed an interdisciplinary approach using concepts and ideas derived from several disciplines, including sociology, economics, psychology, history and political science (see Chapter 2). Our current definition incorporates conceptual elements from both UK industrial relations and USA labour relations as well as from human resource management theory. The issue of collective disputes between workers and employers has dominated traditional definitions of employment relations, with a fixation on conflict between employers, unions and employees. As shown below, there have been considerable changes recently as employment relations has superseded the traditional concepts of industrial or labour relations and their pre-occupation with collective bargaining and industrial disputes.


Power is an important aspect of employment relations. Power refers to the ability to influence the behaviour of others to get what you want. In an employment relations context, power is important within organisations as different actors have different levels of power in that organisation. Does a low-paid employee have the same level of power when discussing workplace issues as the manager or business owner? How do these power differentials impact on relationships and outcomes? Additionally, power in the wider society is also important because different groups and interests – including government, employer groups and unions – try to negotiate policy outcomes that favour their own group or interests and reflect their values and priorities.

Traditionally, industrial/labour relations were concerned with ‘macro’ questions, including how employers and businesses are a part of the wider community and how they play an important role in society. In particular, industrial/labour relations have focused on three aspects of the employment relationship, namely: the key parties (employees, employers, and government), the processes of collective bargaining (including conflict resolution), and the outcomes of these processes (Bamber et al., 2016). In particular, the way collective conflict was regulated has received plenty of attention. Regulating industrial conflict involves the development of formal rules – such as written employment contracts and policies – and of informal rules – such as custom and practice (see Chapters 13 and 14 in Rasmussen, 2022). Thus, the focus is on structures that regulate matters of conflict arising out of the employment relationships which includes the regulation of power relationships in the workplace. Additionally, industrial/labour relations have traditionally concentrated on unionised, male, manual workers employed in large factories and have tended to ignore workers in service industries, workers in small workplaces and non-unionised employees.

The rise of Human Resource Management (HRM) since the 1980s has also had a major influence on our understanding of employment relationships. HRM emphasises a strategic approach to achieving organisational goals and involves a series of management prescriptions designed to ensure the efficiency and commitment of employees (Boxall & Purcell, 2011). The focus of HRM is, therefore, on the individual organisation and the way the individual worker can be managed in order to enhance the achievement of broader organisational objectives. As a result, HRM has been linked closely with motivation in the form of psychological and economic dependency. The emphasis is on winning the ‘hearts and minds’ of the workforce in order to achieve the common goals of the organisation (Bratton & Gold, 2017; McAndrew et al., 2018).

The traditional views of both industrial/labour relations and HRM have been challenged while, at the same time, extracting the more useful aspects from the two disciplines. As a result, the distinctions between industrial/labour relations and HRM have become blurred, creating an over-arching discipline called ‘employment relations’ (Bamber et al., 2016; Kelly, 2012). This shift in definition has the advantage that it extends the boundaries of industrial/labour relations and HRM to include all aspects of the two approaches. Most important of all, it has incorporated both the ‘macro’ or broader approach adopted by industrial/labour relations and the ‘micro’ or organisational approach of HRM. It is recognised, therefore, that the employment relationship does not exist in isolation and can be found on many levels: international, national, industry, organisational and workplace levels.

Levels of employment relations

What occurs in New Zealand employment relations is often influenced by international trends and events. International trade agreements, the operations of multinationals and the pressure to conform to international labour conventions and treaties all have an impact on the way employment relations are conducted in this country. For example, multinational companies’ movement in and out of a country typically depend upon whether or not that country’s labour and compliance costs will benefit the multinational organisation financially. Concern has been expressed in New Zealand about the way multinationals influence our wages and conditions by choosing to set up their manufacturing operations in nearby poorer countries with weaker employment protection legislation, in direct competition with New Zealand manufacturers. Employment relations at a national level are also influenced by international institutions, such as the International Labour Organization (ILO), of which New Zealand was a founding member. Since its foundation in 1919, the ILO has been involved in the promotion of international labour standards (see https://www.ilo.org/global/lang–en/index.htm). In recent years, the ILO has become more important through promotion of Decent Work principles (see Ferraro et al., 2015) which have also influenced legislative changes and public policy discussions in New Zealand.

Most decisions regarding New Zealand employment standards are taken at a national level. Employment standards are contained in national statutes that govern how people are employed, their minimum level of pay, and their conditions of work. For example, the Human Rights Act 1993 establishes anti-discrimination standards; the Minimum Wages Protection Act 1983 sets standards for minimum wages, and the Health and Safety at Work Act 2015 provides guidelines for health and safety in the workplace (see Chapter 5). Economic, social and welfare policies constructed by government also have major consequences for both employers and employees throughout New Zealand. For example, the government policy decision to deregulate the automotive industry in the late 1980s and to reduce tariffs resulted in the closure of car manufacturing plants and other related businesses. Likewise, the changes to immigration rules during the Covid-19 pandemic had major labour market repercussions and created recruitment problems in several industries.

Although there is a national framework of employment relations standards (see Chapters 4 and 5), general parameters for wages and conditions are, more often than not, set at the industry level. For example, a qualified motor mechanic with three years’ experience will have a good idea of how much they should be paid by making relative comparisons with other mechanics who have the same level of qualification and experience. Wages and conditions within industries can be set either directly or more indirectly through flow-on effects. Wage rates and specific conditions can also be negotiated directly between the representatives of employers and employees at an industry level (see the discussion of Fair Pay Agreements in Chapter 4). In the last three decades, there has been a shift from collective, industry-based wages and conditions to workplace-based, individual employment agreements (see Chapters 3 and 4). This has created a much wider divergence in pay and conditions; not only between industries but also between occupations, workplaces and individual jobs within particular organisations.

Corporate decisions can have either positive or detrimental effects on an organisation’s employment relations. Strategic decisions, such as the introduction of new technology, the way the company is structured, the opening or closing of new plants and offices, or the introduction of new management practices, will affect the lives of the organisation’s employees. Decisions taken at the corporate level about redundancies, less job security, etc., are also likely to have a detrimental effect on the workforce. However, some employers have purposely adopted human resource policies and implemented corporate strategies that will enhance their employment relations as well as their public image. But as organisations change over time, so do their strategies. For example, in the past New Zealand-owned companies have had strategies that fostered harmonious employment relations and longer term commitment to their company (see Chapter 6). But as the companies changed ownership and senior managers left, new managerial strategies were implemented to reflect the new ethos of the organisation. It is at this level, too, that HRM strategies – such as good communication and innovative reward systems – are most effective in motivating the workforce and improving employee morale and satisfaction.

However, it is at the workplace level that the employment relationship is most keenly felt. The day-to-day activities and how they are managed will often determine the quality of the relationship between supervisors and staff. For example, as a result of the replacement of complex organisational hierarchies with team-based organisational structures, some employees can have a large degree of autonomy over how they work. This influences aspects, such as the allocation of tasks, the design of the job, the allocation of overtime, and so on. The move toward team-based structures has also produced a change in titles – the terms ‘supervisor’ and ‘staff’ have been replaced with ‘team leader’ and ‘team members’ – but the question is: has it changed hierarchical divisions? The devolvement of responsibilities to the workplace level in the last decades has had a significant impact not only on how we work but also on our employment relationships in general. Likewise, greater employment flexibility and atypical employment arrangements have also impacted on employment relationships and this is, in part, why there is such a debate about the potential influences from various ‘future of work’ scenarios.

Employment relations can be studied, therefore, at the international, national, industry, corporate and workplace levels, and can be affected by external factors, such as technological change, market conditions, societal and political power shifts. It is clear, therefore, that the nature of employment relations can only be fully understood in the context of, and in relation to, wider socio-economic, political and legal structures.

Interest groups

The subject of employment relations is also concerned with the study of how individuals, groups or organisations desire their interests to be represented (collectively or individually), and what these interests are; for example, the amount of pay, hours worked, or production output. Interest groups are organised groups of people – who are not political parties – who come together to influence laws and policies.

As mentioned above, employment relations laws and policies are not created in a vacuum. There are many competing interest groups who aim to influence how employment regulations are enacted and implemented. Indeed, some argue that national decisions concerning the creation of employment regulations are essentially a compromise between the wishes of powerful interest groups and those of the government (see CIPD, 2017). According to this view, the government is to be regarded as serving primarily the interests of those whom it regulates, namely the employers and employees. At the corporate level, employers and employees are in competition with one another for power and control over the decision-making process, knowledge, information and technology, though more power and control normally rest with management.

The government

Historically, the government has played a central role in New Zealand’s employment relations, although the nature of its activity has varied from direct, centralised government control to a more hands-off approach whereby markets are left to organise employment relations with less state intervention. Irrespective of the extent of government involvement in employment relations, it is a critical player, creating the framework within which employers and employees interact. This framework influences the balance of power between employer and employee interest groups and provides structures for conflict resolution. This relationship is bound by conventions developed over the last century with the government establishing an employment relations framework through legislation and legal institutions (see Chapter 3).

Government departments have the responsibility for regulating and promoting compliance with the raft of employment legislation that deals with issues like working conditions and minimum wages (for example, through the Labour Inspectorate in the Ministry of Business, Innovation and Employment [MBIE]). During the 19th century, concerns about the working conditions of women and children, as documented in the 1890 Sweating Commission, led to the establishment of a system of statutory minimum conditions contained in the Factories Act 1891 and later the Industrial and Conciliation Act 1894.

Subsequently throughout the 20th century, legislation was updated with some Acts being amended and others replaced. Like Australia, New Zealand had adopted an award system. Under the award system, different award documents contained occupation- and industry-specific minimum wages and conditions, including, the level of pay, hours of work, special rates for overtime, dangerous or piece work, etc. However, the system ceased with the enactment of the Employment Contracts Act 1991 and, as a consequence, employment relations statutes, such as the Minimum Wage Act and the Holidays Act, have become more important as they now provide the minimum standards.

The current legislative framework, the Employment Relations Act (ERA) 2000, therefore, is supported by other legislation that sits alongside and stipulates, for example, adult and youth minimum wage rates, paid annual leave requirements and personal grievance and disputes procedures. The statutory minimum standards contained in these supportive employment relations statutes are regulated by MBIE’s Labour Inspectorate while employment or ‘personal’ grievances are enforced through the Employment Institutions. Personal grievances and employee rights are discussed later this chapter.

New Zealand employment laws and procedures are also formed and defined by the country’s legal system. Under the ERA 2000, employment matters are handled by the MBIE’s Employment Mediation Services, the Employment Relations Authority and Employment Court. The government continues to separate out employment matters from other legal issues as a way of ensuring that it retains a role in the regulation of employment relationships and that employees have direct access to procedures which allow them to seek redress for employer actions (McAndrew, 2010; Rasmussen & Greenwood, 2014).

However, periodically, there has been pressure both inside and outside the New Zealand Parliament to abolish specialist employment law institutions (Rasmussen, 2009, pp. 83-84). The desire to discontinue a separate employment legal system was based, to a large extent, on the employers’ criticism of the Employment Court’s decisions. In particular, such criticism was levelled at the Court’s firm intention to uphold the notion of ‘procedural fairness’, its recognition of and accessibility to employee representatives, its opposition to harsh and oppressive contracts, and its views on home workers’ contractual status (Anderson & Hughes, 2014; Simpkin, 2006).

It should also be remembered that the government is, itself, not only a regulator and arbitrator, but also a substantial employer. Many of its employees work in essential service areas such as policing, defence, health, education and welfare. The government is also an indirect employer through its procurement practices (Ravenswood & Kaine, 2015). Many New Zealanders are employed in either privately-owned companies or non-governmental agencies that receive substantial funding from the government. People working in both private and public sectors are covered by the ERA 2000 but public servants are also covered by the State Sector Act 1988. The latter Act follows public sector legal tradition by making provision for a separate negotiating body, the State Services Commission.

Since 1988, the employment practices of the public sector have fallen more in line with those of the private sector. Chief executives of government departments now have the freedom to employ, dismiss, promote and discipline staff – with the exception of senior executives. Most government departments have expert employment relations advisers to ensure good practices and that the departments meet the requirement of being a ‘good employer’ as set out in the State Sector Act.


There are many groups that represent a range of employers’ interests. For example, there are Chambers of Commerce, industry and trade associations, and employer groups such as Business New Zealand that specialise in employment matters. In the 1980s and 1990s, employer lobby groups placed increasing pressure on the Labour and National governments to enact radical labour market reforms. At the heart of their argument for labour market reforms was the notion that the traditional protection of trade unions and centralised collective bargaining was, in fact, diminishing the rights of both employers and employees, undermining business competitiveness and creating unemployment (Harbridge, 1993).

One of the more effective employer lobby groups in New Zealand was the Business Roundtable (NZBRT). Founded in 1985, membership of the Roundtable was by invitation only and restricted to the chief executives of New Zealand’s largest companies. The NZBRT promoted a consistent view of employment relations, in line with ‘right-wing’ or libertarian ideology (Harris & Twiname, 1998; Kelsey, 1997). This included vocal support to end compulsory trade union membership and promotion of more individualised employment relations. The NZBRT had considerable influence on public policy during the 1985-1996 period. However, it lost the ear of governments from the late 1990s onwards. In 2012, they merged with the New Zealand Institute to form a new think-tank, The New Zealand Initiative.

However, far more representative of employers’ interests are the employers’ and manufacturers’ associations situated in the main regions. Business New Zealand was created after a merger of the Employers’ Federation and the Manufacturer’s Federation in 2001, and has specialist divisions for representing, at a national level, the interests of exporters, manufacturers, and its Major Companies Group. The employers’ and manufacturers’ associations also provide a range of services – from training to legal representation – for their members. However, like the trade unions, they have had to adjust to the deregulated economy and rapidly changing employment environment of the last decades.

The other significant representative of employers’ interests is the Chambers of Commerce. Established over 160 years ago the branches are also located in the main New Zealand regions. Like the employers’ and manufacturers’ associations, they offer a range of employment relations/HRM services. Finally, there are business groups that have been formed to respond to a particular issue, for example, the Business Leaders’ Health and Safety Forum. Launched in 2010, the Forum is a coalition of business and government leaders representing about 300 private and public sector organisations with the aim of improving the performance of workplace health and safety in New Zealand.

Trade unions

Trade unions have represented the interests of New Zealand employees in one form or another since the 19th century. Their role was supported and aided by earlier government legislation which ensured compulsory union membership and access to disputes procedures. However, the Employment Contracts Act 1991 abolished the unions’ monopoly position as an employee interest group. As a result, there was an immediate decline in trade union membership. The loss of members was precipitated by the move to individual employment contracts, by disaffected members leaving the unions and by frequent job shifts by employees. From May 1991 to December 1999, union membership fell by more than 50% to 302 405, and union density (the number of union members as a percentage of the workforce) declined from 41.5% to 17.0%, although the number of trade unions stayed roughly the same (see Chapter 3).

This decline severely weakened the power base of the two major employee associations that represent a consortium of trade unions, namely the Trade Union Federation (TUF) and the Council of Trade Unions (CTU). The Council of Trade Unions (CTU) was the larger of the two and, in 2000, represented 21 affiliated trade unions and more than 240 000 employees. By 2001, a merger of the CTU and TUF had brought state and private-sector unions under a single umbrella grouping. Mergers of unions have continued and, in 2016, the CTU represented 31 unions and more than 320 000 employees.

However, trade unions had already started to consolidate their position at the end of the 1990s and, with the introduction of the ERA 2000, they have managed to stabilise their membership numbers, though with private sector unions facing an uphill battle (see Tables 3.1 and 4.1). In addition, there have been a number of mergers creating ‘super unions’. For example, in 1996, the Engineers Union merged with the remnant of the Communication and Energy Workers Union and the Print, Packaging and Media Union. This created the largest private-sector union, the New Zealand Amalgamated Engineering, Printing and Manufacturing Union (EPMU), with nearly 60 000 members. In 2015, EPMU further merged, with the Service and Food Workers’ Union, to create E tū. In 2011, the FIRST Union was created through an amalgamation of the National Distribution Union (organising primarily workers in the transport and warehousing industries) and Finsec (organising workers in the bank and finance industries). Finally, the Public Service Association (PSA) has sustained a strong presence in the public sector as has other public sector unions, such as the teachers’ unions, the nurses’ union and the doctors’ unions.

There have also been new union organising strategies, of which the Living Wage Campaign is one noteworthy example. The Living Wage Campaign is a response to the phenomena of working poor, in which working full-time on a minimum wage is not enough to meet living costs, but also is not enough to live with dignity and to be an active citizen in New Zealand communities (Carr et al., 2018). By approaching and working with community groups including churches, the Service and Food Workers’ Union (now part of E tū)  campaign had, by 2016, managed to get about 60 accredited employers to pay 19.80 NZD per hour (compared with the minimum wage of 15.25 NZD per hour.)

In summary, the interests of the three main groups can be represented on a continuum. At one end are the employers who want to ensure that they are not unreasonably impeded from managing their businesses and making profits. At the other end are the employees who desire fair wages and conditions and some say in the way they work. The government lies somewhere in between these two groups, providing a buffer for the employees and attempting to control the extremes of the employers. In reality, however, the employers’ and employees’ representatives do not restrict themselves just to workplace matters but endeavour to influence government policies on a wide range of issues – from paying fire service levies to social welfare and benefit payments.

Employee versus contractor?

Another key feature of employment relations is the distinction between contracts of service and contracts for service. This distinction has evolved over centuries and has been carried through to the current legislative framework. Contracts of service or employment contracts cover employees working for wages or salaries; that is, employees in factories, shops, offices or professional occupations. Contracts for services cover self-employed contractors, who work for others under contract to provide distinct jobs or services. This involves tradespeople, taxi-drivers and many professionals such as lawyers and doctors. That is, the contractor may do the same tasks as an employee, but their legal status is different from that of an employee: contractors are not covered by the employment relations legislative framework in New Zealand. Contractors are, therefore, not entitled to receive the so-called ‘minimum code’ of statutory protections, such as holidays and other types of paid leave, minimum wages or equal pay. Certain implied terms that are present in every New Zealand employment agreement by statute or common law are not present in ordinary contracts for service (Lamare et al., 2014).

With new forms of jobs and individualised employment and working arrangements, more and more employment situations have arisen where it is difficult to distinguish between employees and contractors. This is often the result of new organisational strategies (in particular, the search for labour flexibility), attempts to reduce income taxation or attempts to avoid the statutory employee protection stipulated by the ERA 2000 and its associated Acts. Determining whether a worker is a contractor or an employee can also be difficult but there are some basic distinctions, as presented in Table 1.1.

Table 1.1  Key features of employment contracts and contracts for services
Employment contracts Contracts for services
Control and management employer has right to control and manage work contractor controls and manages work
Integration the worker is ‘part and parcel’ of the organisation (e.g. wears uniforms) contractor may take work from other ‘principals’
Hours of work set by employer contractor may work hours of own choice, provided work gets done
Tools and equipment provided by employer provided by contractor
Form of payment linked to time worked (hourly, weekly, etc.) and with wages paid on a regular basis contractor paid for job as a whole
Profit and loss borne primarily by employer contractor is in business on own account
Payment of sick pay, holiday pay, PAYE etc. responsibility of employer responsibility of contractor
Service employee must give personal service contractors may send someone else – including their own staff

Sources: Rasmussen & Lamm, 2002, p. 55; Lamare et al., 2014

Different courts have also decided whether a worker is a contractor or an employee, but the rulings can be conflicting. For example, in the New Zealand case Bryson v Three Foot Six Ltd. (2003, 2005), the Employment Relations Authority decided Mr. Bryson was a contractor but the Employment Court and the Supreme Court decided Mr. Bryson was an employee (see the Special Issue of the New Zealand Journal of Employment Relations, 2011, 36(3), for a more detailed discussion of these decisions and the so-called ‘Hobbit’ legislation in 2010).

Notwithstanding the different legal decisions, the courts have developed a number of tests over the years in order to establish whether a person is working under an employment contract or under a contract for services (Anderson & Hughes, 2014). There are basically four such tests:

  • the control test
  • the organisation test
  • the business test
  • the composite test (involving all of the previous three tests).

These tests are important because they indicate key characteristics of an employment relationship. The control test, for example, indicates that the employment relationship is a power and authority relationship. This authority is often referred to as ‘managerial prerogative’ – that is, the ability to manage other people and to issue demands. However, some employees can have a significant amount of discretion in how they do their work and as a result the control aspects become less clear-cut. This is the case, for example, with many highly skilled employees such as computer specialists, academics, legal or financial specialists.

This discretion is important in the organisation test which asks whether the employee is part of an organisation or whether the work the employee does is central to the organisation. The business test attempts to establish whether the person is running a business or whether the person is dependent on an organisation. Finally, the composite test is an assessment of the employment status that takes the three previous tests into account. This test is probably the way that court decisions are moving as the distinction between being an employee or a self-employed contractor becomes more and more blurred. However, in particular cases, the court will place greater emphasis on one or another of the tests, as appropriate.

In summary, while contractors retain rights and protections under general contract law, these rights, however, do not equate to those defined by employment laws designed to protect employees from what the ERA 2000 calls ‘the inherent inequality of bargaining power in employment relationships’. In the next section, we will explore employee rights, employee agreements and institutions in more detail.

Employee rights and the Employment Institutions

Under the conciliation and arbitrations system (1894-1990), the legislative framework had a focus on collective bargaining and collective agreements while individual agreements were dealt with under common law. This meant that many employees had no access to pursue employee rights through the Employment Institutions. This changed with the ECA 1991 where all employees had an employment contract/agreement and their employee rights could be pursued through the Employment Institutions (see Chapter 3). This is still the case under the ERA 2000, though this Act uses the term employment agreements (and so will this book) and is more prescriptive about the types of agreements allowed and their content.

Generally, employment agreements are made up of different components. The key components of an employment agreement are:

  • the agreement itself (whether verbal or written)
  • statutory entitlements
  • customs and practice
  • implied terms.

The employment agreement often consists of more than one document. It could include a separate job description or the so-called ‘House Rules’. The House Rules specify the workplace culture and particular ways of behaving in the workplace and can also provide detailed information regarding aspects such as use of equipment, company cars and the corporate wardrobe.

The agreement has to be in keeping with the statutory entitlements of employees, which are currently prescribed partly in the ERA 2000 and partly in a number of other Acts relating to industry, workplace and work practices (see, for example, the discussion of occupational health and safety in chapter 5). Customs and practice relate to workplace practices that, over time, have become a norm and that both employers and employees take for granted. For example, some workplaces may close early for Christmas or the organisation may be closed for the whole of Anzac Day. While such norms are important in creating a positive workplace culture and in running the day-to-day affairs of an organisation, problems can arise because of a lack of clarity and because they do not provide clear guidelines in respect of accountability.

Implied terms are norms that have become accepted as minima through many years of legal precedent. They concern certain basic rights and obligations with which employers and employees will have to comply. These include employee obligations such as turning up for work, following the employer’s directions, and looking after the organisation’s property and other employees’ well-being. On the employer’s side, it includes obligations to provide a safe workplace, to deal honestly with employees and to pay them the agreed wages. Thus, the rights and obligations often relate to behaviour that most people would regard as a matter of common sense (for more detail see Anderson & Hughes, 2014).

What could an employee expect to find in an employment agreement? The content of such agreements varies according to the job, the organisational culture and existing contractual arrangements. While some employees have a verbal employment agreement, most employers and employees prefer a written agreement as this clarifies the rights and obligations of the two parties. A written employment agreement has been prescribed as the norm under the ERA 2000 (see Chapter 4). Presented below are a number of items that are often found in employment agreements. The absence of some of these items from an employment agreement may have important implications.

Employment agreements are governed by statutory entitlements, customs and practice, and implied terms. This means that there are certain entitlements which cannot be undercut by any employment agreement. The statutory entitlements are mentioned in the ERA 2000 (see Chapter 4). There are, for example, existing default personal grievance procedures that will come into play if no such procedures are specifically included in an agreement. Likewise, there are minimum leave entitlements and statutory minimum wages both for adult and youth workers. Finally, inherent in the implied terms is that the employment agreement can cover only legal arrangements. Thus, in respect of employment, civil and criminal law, the agreement must not include any unlawful stipulations.

This means that such unlawful conditions or conditions below statutory minimum conditions, even if agreed to in an agreement, cannot be upheld. In other words, even if an employer and an employee have agreed on a wage below the statutory minimum wage, it would nonetheless be possible for the employee to seek a back payment from the employer, equal to the difference between the agreed and the statutory minimum wage for the period of employment. Thus, having an employment agreement provides significant protection and this makes the distinction between an employee and a contractor/self-employed person very important.

Table 1.2  Employment contracts and standard employment conditions
Terms of the contract •   starting date

•   position and duties

•   variation of contract

•   house rules

Hours of work •   standard working hours

•   overtime

•   breaks (tea or meal breaks)

Leave provisions •   annual leave

•   public holidays

•   sick leave

•   parental leave

Remuneration •   salary or wages?

•   wages and salaries: payment period and review period

•   wages and salaries: performance pay or bonuses

•   wages: penal rates and overtime pay

Employment terms •   termination

•   redundancy

•   retirement

Grievances and disputes •   codes of conduct

•   misconduct and dismissal

•   procedures: personal grievances and disputes

Other provisions •   occupational safety and health: prevention, procedures and reporting

•   new technology: planning, implementation and training

•   company information and confidentiality

•   training: availability, link to remuneration and promotion

Source: Rasmussen & Lamm, 2002, p. 54

Employment institutions and personal grievances

The establishment of specific Employment Institutions became a major feature of New Zealand employment relations with the introduction of the Conciliation and Arbitration Act 1894, and they are still a major feature under the ERA 2000. Unsurprisingly, the names, roles and specific functions of the Employment Institutions have changed considerably over time. The current Employment Institutions are the Mediation Service, the Employment Authority and the Employment Court and their roles and functions are discussed in Chapter 4. The personal grievance has been a crucial employee right since the Employment Contracts Act 1991 extended access to the personal grievance procedure to all employees. Since then, legislation has afforded employees the opportunity to decide themselves whether they would lodge a personal grievance claim, whereas previously, the claims procedure had been conducted through unions. This led, as was expected, to a rise in personal grievance claims (see Chapter 3). Since the mid-1990s, the Employment Institutions have had to deal with several thousand cases a year and most of these cases are personal grievance cases.

The personal grievance right has been controversial and it has often generated very critical employer evaluations (Walker & Hamilton, 2011). Some employer associations have pointed to some employees developing an ‘American litigation’ mind-set, especially when some employee representatives have an outcome-based fee structure whereby the employee only paid the representative if the case was won. The employee has, therefore, little financial risk in pursuing a personal grievance claim (Burton, 2004; 2010).

Another frequent employer complaint has been the emphasis on procedural fairness by the Employment Institutions (see below). Such employer advocacy has been criticised as exaggerating the lopsidedness and levels of payments associated with the personal grievance right, and instead personal grievance is seen as a useful constraint on the employer prerogative and promoting better conflict management (McAndrew, 2010). However, the 2008–2017 National-led Governments abolished the automatic personal grievance right of new employees – it was now up for negotiation (the so-called 90-day trial period) – which have influenced employment norms amongst young and low-paid employees (see Table 2 in Foster & Rasmussen, 2017, p. 102). While the post 2017 Labour-led Government has reversed several of the 2008–2017 changes, it is noticeable that it has kept the 90-day trial period for organisations with less than 20 staff.

Most of the personal grievance claims concerned unjustifiable dismissals. This probably suggests that a better understanding of the dismissal procedures by employees and employers alike was necessary. There are three types of dismissals (Anderson & Hughes, 2014, pp. 359-370):

  • the standard, general type of dismissal
  • summary dismissals
  • constructive dismissals.

We will concentrate on the standard, general type of dismissal and only briefly describe the two other types. Summary dismissals occur when the employee is dismissed instantly and without any notice. This is a very drastic action that should only occur very rarely and only when the employee is guilty of serious misbehaviour. What constitutes ‘serious misbehaviour’ will alter over time but the term is normally associated with stealing, fighting, deliberately disobeying the employer’s requests, and with a disregard for other persons’ safety and health. Constructive dismissals occur in situations where the employee feels under pressure to resign. This can include situations in which a manager has ‘leaned’ heavily on an employee through constant criticism, allocating inconvenient rosters, or through publicly expressed dissatisfaction with the work performance. It can also include a situation in which the employee is given the choice of resigning or being dismissed.

A dismissal is only justifiable if it is fair and reasonable. This implies that there must be adequate justification (due cause) and a fair process. Adequate justification would include misconduct, dishonesty or lack of punctuality on the part of the employee. However, dismissals are often associated with so-called ‘performance problems’, where the performance of the employee has fallen short of the expectations or standards set by the employer. In the case of performance problems, the following elements are important: the expected standards must be clear and the employee must be aware of the standards; these standards may not have suddenly changed, and the employee must have received adequate training and supervision to meet the expected standards.

Under the Employment Contracts Act 1991, the idea of a fair process, also known as procedural fairness, received a lot of attention (Anderson & Hughes, 2014, pp. 344-359). Key elements of a fair process are a discussion of the issues at stake between employer and employee and issue clarity. These key elements are important as each party should understand the other’s position and also what changes and outcomes are sought. Procedural fairness includes giving the employee the opportunity to rectify the problem and making sure the employee understands that he/she could be dismissed if the problem is not solved. The employee should, in other words, be aware of exactly what the problem is and should know what to do in order to rectify it. The employee should also be given adequate time to rectify the problem and a clear warning must be issued that his/her employment could be terminated if the problem is not rectified.

If the warnings do not bring about the changes sought, then it may be necessary for an employer to consider terminating the employment relationship. In such situations, procedural fairness is important and Fryer and Oldfield (1994, p. 71) have recommended the following steps:

  • ‘give a proper explanation to the worker of the reasons that dismissal is being considered, including details of alleged wrongdoing;
  • give the worker the opportunity to put their side of the story – defenses, explanations, any mitigating factors;
  • make a full investigation of the situation before coming to a final decision. This includes taking into account the worker’s explanation, interviewing other staff members where necessary, etc.’

Despite these relatively simple guidelines, many employers have complained about the complexity surrounding personal grievances and how decisions in the Employment Institutions can negatively influence employing and managing people. While these are controversial and contested positions, the changes in employment regulations have featured strongly in political debates (see Rasmussen, 2009, pp. 11-15).

A particular problem has been the crucial importance of legal precedent – that is, court decisions on key legal issues – in formulating precise guidelines for bargaining and workplace behaviours (Caisley, 2004). This can be a long-winded process and it can lead to shifting legal interpretations which can be difficult to understand for the average employer and employee. While the ERA 2000 has tried to limit the importance of legal precedent by having a prescriptive legal framework, there are continuously new challenges to the precise interpretation of legislative principles and their practical application (Greenwood, 2016).


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Introduction and overview of employment relations Copyright © 2022 by Erling Rasmussen; Felicity Lamm; and Julienne Molineaux is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.

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