Permanent or fixed-term employment

Permanent employees

Permanent employees:

• have ongoing employment which does not have an end date — the employment relationship will only end when either the employer or employee terminates it, for example, if the employee resigns
• can be part-time or full-time
• have all employment rights and responsibilities.

Most employees in New Zealand are permanent. Every permanent employee must have an

Employee rights and responsibilities

Permanent part-time or casual

An employee who is permanent part-time is not the same as a casual employee.

A permanent part-time employee generally works less than about 30 hours a week and has regular and guaranteed hours or days of work.

Casual employees work when it suits them and their employer, and there is no guarantee or expectation of regular or ongoing employment.

To learn more about casual employment, visit:

Casual employment

Changing from permanent to casual

Employees may want to change the way they work, for example, if they start tertiary study or return to work after parental leave and need to fit work around other commitments.

If a permanent employee wants to change their work arrangements, they should first consider asking their employer if they can:

• put flexible working arrangements in place, or
• change their permanent hours of work.

These options mean they can continue working as a permanent employee instead of becoming casual.

Requesting flexible working arrangements

However, employees can change from being permanent to casual if they agree to this with their employer.

If an employer and employee agree for the employee to change from permanent to casual, the employer must make sure that any annual holiday and alternative holiday entitlements are dealt with properly. One way to do this is for the employee to sign a casual employment agreement and then resign from their permanent employment. Any and alternative holidays they’re owed are paid out in their final pay from their permanent employment.

The employer must make sure any changes to employment are made in writing and agreed to by the employee.

Final pay

Creating an employment agreement

Fixed-term employees

Fixed-term employees:

• have temporary employment which will end on a specific date or when a particular event happens — for example, when a project is completed or a secondment ends
• can be full-time or part-time
• are not the same as contractors (a contractor is not an employee). They have the same employment rights and responsibilities as permanent employees for the time they’re employed, except they can get their annual holidays as pay-as-you-go if the fixed term is for less than 12 months.

Employee or contractor?  

Employee rights and responsibilities

Genuine reason for the fixed term

There must be a genuine reason based on reasonable grounds for fixed-term employment.

This means there must be a real, sensible reason for hiring someone for a fixed amount of time.  

The reason must be to do with the work, not the employee’s personal situation. For example, it’s not a genuine reason to hire someone on a fixed term because they can only work for a limited period of time.

The employer must tell the employee what the reason for the fixed term is. The reason must be recorded in the employment agreement.

If the reason is not genuine or based on reasonable grounds, it may not be enforceable. This means the employer may not be able to rely on it to end the employment. If they do, the employee may be able to claim unjustified dismissal.

Employment agreement for fixed-term employees

Fixed-term employees must have an employment agreement. The agreement must say:

• how the employment will end, for example, on a specific date, and
• the reason for ending the employment that way, for example, because a project has ended.

You can use our Employment Agreement Builder to create an employment agreement.

Employment Agreement Builder(external link)

Annual holidays for fixed-term employees

All employees are entitled to 4 weeks of paid annual holidays each year after 12 months of continuous employment.

Annual holidays

Employees on fixed-term agreements of less than 12 months can get their annual holiday entitlement on a pay-as-you-go basis if they agree to this in their employment agreement. This means they can agree to have:

• 8% of their gross earnings added to their pay each pay period (a pay period is how often someone is paid, for example, every 2 weeks), or
• 8% of their gross earnings paid out at the end of the fixed term.

Employers must only use pay-as-you-go if the employee genuinely qualifies for it. There are also other rules about paying pay-as-you-go. Find out more:

Pay-as-you-go annual holiday pay

Ending (terminating) a fixed-term agreement

A fixed-term agreement will automatically end on the agreed end date or event unless it’s:

• terminated early, or
• extended.

The employer does not have to give notice because they’ve already agreed with the employee how and when the employment will end. However, it’s still good to talk to the employee about the work ending before they finish up.

If the employer wants to end the agreement early

Employers must have a good reason to end the agreement early.

If the employer wants to dismiss the employee, they must follow a formal dismissal process. This includes having a good reason for the dismissal, like serious misconduct.

Dismissal

If the employee is being made redundant, then they are entitled to the notice period in their employment agreement.

Redundancy 

If the employee wants to end the agreement early

If the employee wants to end the agreement early, they need to resign (give notice). Check the employment agreement to see what it says about how much notice is required.

Resignation

Extending a fixed-term agreement

If the employer wants the employee to continue working, but still for a fixed term, they must:

• extend the agreement, or
• offer the employee a new fixed-term agreement.

For example, the employer might want the employee to continue working if the project they’re working on is taking longer than expected.

The employer must make sure any changes to employment are made in writing and agreed to by the employee.

There is no limit on how many:

• times a fixed-term agreement can be extended
• fixed-term agreements an employee can have.

However, there must be a genuine reason each time. The more times an agreement is extended or the employee moves from one fixed-term to the next, the more likely it is that:

• the reason is no longer genuine
• the employment would be seen as ongoing (permanent).

Working past the end date

If the employee and employer keep working together past the end date but do not formally extend the agreement, the terms and conditions could still be enforceable. This means the employer and employee could still hold each other to the agreement because the employment relationship has continued. However, the employer may not be able to rely on the agreement to end the employment. If they do, the employee may be able to raise a personal grievance.

To avoid confusion or possible disputes, it’s important to make sure the employment agreement does not expire if the employer wants the employee to keep working. The employer should update the agreement, or give the employee a new agreement, which confirms what the working arrangements are — for example, whether the role is still fixed-term or has become permanent.

Changing from fixed-term to permanent

Employees who start off as fixed-term may become permanent if:

• the work they’re doing will carry on indefinitely
• the reason for being fixed-term is no longer genuine.

The employer must make sure any changes to employment are made in writing and agreed to by the employee.

Creating an employment agreement

Annual holidays when employee becomes permanent

If the employee has been on a fixed-term agreement of less than 12 months and then changes to permanent:

• the period of the fixed-term counts towards continuous employment for working out annual holidays, and 
• when the employee takes annual holidays, their employer can reduce their annual holiday pay by the amount already paid as pay-as-you-go. Find out more:

Pay-as-you-go annual holiday payments