Mistake # 1 - Not Having a written employment agreement
All employees need a written employment agreement, which should be dated and signed before they start working for you. The employment agreement must cover particular points, including hours of work, pay, and how to deal with employment relationship problems.
Having an out-of-date or unsuitable employment agreement can cause a lot of issues. Having no employment agreement at all is even worse. An individual employer can be fined up to $10,000.00 for not having an up-to-date copy of each employee’s employment agreement, and up to $20,000.00 if the employer is a Company.
Before any employee starts work, make sure that you have a suitable employment agreement or ask Godfreys Law to prepare one for you. This can save you a lot of cost and stress later down the track.
Mistake # 2 - Incorrectly using trial periods
Trial periods are a good way of assessing whether a new employee is right for your business. If the employee isn’t a good fit you can dismiss them during the trial period, and they cannot raise a personal grievance for unjustified dismissal. However, trial periods must be used correctly to be enforceable.
You can only use a trial period for a new employee, not existing employees. The trial period must meet all legal requirements and be recorded in the employee’s employment agreement. It is also critical that the employee agrees to the trial period and signs the employment agreement before they start work.
After 6 May 2019, only businesses with fewer than 20 employees will be able to use trial periods.
An incorrectly used trial period has no legal effect. As a result, if you dismiss an employee under the trial period, they can bring a personal grievance for unjustified dismissal. This could result in you having to reinstate the employee, and/or pay compensation.
Compensation for unjustified dismissal can be very costly. Recent awards in the Employment Relations Authority average around $10,000.00, with some awards being over $25,000.00. On top of that, you may have to pay lost wages and both parties’ legal costs, which will go well into the thousands.
If you want to use a trial period or dismiss an employee during their trial period, talk to Godfreys Law first. You could otherwise end up stuck with a problem employee, or an expensive personal grievance.
Mistake # 3 - Immediate dismissal
Employers often think – incorrectly - that they can dismiss employees on-the-spot for serious misconduct. This is a fatal mistake that will cost you dearly!
Employment agreements often say that an employee can be dismissed “without notice”. Without notice just means that the employee does not work out their notice period, not that the employee can be fired on the spot.
Before dismissing an employee for any reason, you must follow a fair process. There are several key steps involved in fair process, including proper investigation and giving the employee opportunities to comment.
If you dismiss an employee without following fair process, you essentially hand them a successful personal grievance. This can again result in you having to reinstate the employee and/or pay upwards of $10,000.00 in compensation, plus lost wages and legal costs.
Never dismiss an employee on the spot, no matter what they may have or seem to have done.
The Employment team at Godfreys Law can help you avoid making these mistakes, as well as help you address any existing issues. Contact the Employment Law team at Godfreys Law on (03) 366 7469.
Brad McDonald – Partner
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