The Bare Basics of Taking on Staff

Taking that next step of paying people to help in your business is often daunting.

Suddenly your business is responsible for others and has greater financial responsibilities. Further, the legal obligations attaching to your business suddenly increase dramatically. It is not uncommon for business owners to lie awake at night stressing over the enormity of this step in their business growth.

The purpose of this article is to assist you when you take this next step. To make things simpler and less stressful for you.

Ok, so you have identified you need help. The very first question to ask is “Do I need an Independent Contractor or an Employee?” (You may want to refer to our related article The Next Big Step)

If you have made the decision to use Independent Contractors we strongly suggest that you first contact your accountant with regard to tax implications. As a result of this conversation you should be clear on what records you are required to keep with regard to the payments you make to your Independent Contractors. The next step in the process is to ensure you have the correct documents in place outlining the commercial arrangement you have agreed to. We recommend using an appropriately drafted Statutory Declaration alongside a written Independent Contractors Contract. It is important to be open and transparent about what you have agreed to. Disputes are less likely to happen if both parties are clear about their responsibilities. Ensure you have both these documents duly signed and that both parties retain a signed copy of the documents.

Further, as a business owner engaging Independent Contractors, you have health and safety obligations. As a starting point your business is required to have in place a written health and safety policy outlining hazards attaching to your business and attaching to the tasks undertaken within your business. This policy should describe where the list of hazards is located and how these hazards are managed. Your Independent Contractor is also required to have a Health and Safety policy. You are required to discuss health and safety issues with your Independent Contractor, prior to them commencing work for your business. Specifically you are required to ensure that both parties are aware of the hazards attaching to your business and of the hazards attaching to the specific work undertaken by the Independent Contractor. The parties are required to be transparent about who is responsible for the management of each specific hazard. You will be required to have a written record of this hazard management plan. Health and Safety is a serious issue and if you get it wrong the consequences are significant both in human terms and legal penalties. WorkSafe New Zealand has an excellent website with tools and resources to assist business owners on this issue. We strongly recommend you use this site.

If you are a business owner intending to recruit employees, ensure you have in place certain documents for your business before offering employment. Again we suggest talking to your accountant with regard to tax implications and KiwiSaver obligations. Many accountants offer small businesses cost-effective assistance with payroll and the management of KiwiSaver.

The next step is to give thought to the type of employee you require. For example, do you require casual employees; employees on fixed term employment agreements (for example, only for a six month period of time to assist over a very busy time of year); or employees for an indefinite period of time (permanent employees). Further, do you require your employees to work part-time hours or full-time hours? Do you require a Trial Period? Are you requiring employees with set qualifications and/or experience?

Once you have established the answers to these questions you are ready to draft your Pre-Employment Form and your draft Employment Agreement. Please note that the Employment Relations Act 2000 requires all employment agreements to contain certain information. We have a free resource that provides more information on this issue, should you require it.

If you intend to use a Trial Period, you will need to address this issue before offering employment. This requires you to inform applicants that a Trial Period attaches to the role, and you must also have a duly drafted employment agreement, with a Trial Period clause compliant with legislation. This agreement must be signed by the potential employee, before they commence any work at all for your business. We have a free resource on Trial Periods that may assist you with this issue, should you require further assistance.

It is a legal requirement to have compliant employment agreements, duly signed, for all your employees. Provide each of your employees with a signed copy of their employment agreement, and retain a signed copy of each agreement for your business. These agreements must be stored securely and are protected by the provisions of the Privacy Act 1993.

It is also a legal requirement to advise your potential employees of their right to seek independent advice about the employment agreement before they sign the agreement.
Further, you are required to provide appropriate time to seek such advice.

Health and Safety obligations are becoming more onerous for employees this year as a result in amendments to legislation. Again we suggest employers access the WorkSafe website for assistance with their obligations.

This article is intended as a point of reference and should not be relied on as a substitute for professional advice. Specialist advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this article.

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