Careers advice

Differences between permanent, casual and fixed-term contracts in NZ

Do you know the difference?

What you’ll learn:

What is a permanent contract?
What is a fixed term contract?
What is a casual contract?

In the heat of the moment, after being offered a job, it can be all too tempting to rush through the paperwork and concentrate on celebrating.

However, it’s crucially important that you take the time to read your employment agreement carefully, and understand every element of what it includes.

Perhaps one of the most important things to grasp is the type of contract you’ll have. However, the names of the types of employment contracts in NZ can be a little confusing, and don’t immediately allow you to understand what to expect.

In this article, we’ll break down the key differences between permanent, fixed-term and casual vs. contracts.

What is a permanent contract?

As the name suggests, a permanent contract is one in which there’s no set end date on your employment in that role, and you typically have a regular pattern of hours or shifts at work. Importantly, a permanent contract doesn’t necessarily mean a full-time contract. You can work part-time, for example two days a week, while still being on a permanent contract and enjoying the full range of employee rights and responsibilities.

What is a fixed-term contract?

The key point to remember about fixed term contracts in NZ is that they will end on a predetermined date. For example, a common reason businesses hire someone on a fixed-term contract is to cover when one of their staff goes on parental leave. Another motivation for hiring a fixed term staff member is for when there’s a particular project upcoming and the organisation needs to bring in some specific skills, or bolster the person power of their existing teams. In both of these instances, generally, there will be a fixed point at which things will return to ‘normal’ – when the original employee returns from parental leave, or when the project is completed, in the case of our examples.

Employers often hire fixed-term staff to help with certain important projects.

Importantly, you can be on either a part or full time fixed-term contract. The defining feature of a fixed-term contract isn’t so much the number of hours you work per week, but simply the fact that your contract has an expiry date, which isn’t the case for permanent full-time or part-time contracts. However, depending on the situation in the organisation, and how good an impression you make, there’s always the chance that your contract will be extended, or you might be offered a permanent position.

The other key thing to understand about working on a fixed-term contract, is that you have all the same employment rights as someone on a permanent contract (except for the fact that your employment has a fixed duration). Among other things, this means:

Four weeks’ paid annual leave per year.
10 days of paid sick leave per year after the first 6 months of employment, and 10 days can be carried over to a maximum of 20 days
11 public holidays per year.
Payment of time and a half for working on public holidays.
Payment of the relevant minimum wage.
Overtime paid at the rate of minimum wage per hour.
Three days of paid bereavement leave for specific family members, one day for others.

What is a casual contract?

Think about a casual contract as one that aims to be as convenient as possible for both the employer and the employee. If you’re on a casual contract, the organisation isn’t under any obligation to provide a set number of hours a week, or a month, but equally, you aren’t obliged to accept work when it’s offered. Crucially, it needs to be stated explicitly in your employment agreement that you’ll be working on a casual basis. In addition, it’s a good idea (though not mandatory) for the agreement to also lay out how the employer will let you know when there’s work for you, and specify that work won’t be constant.

Casual staff are often hired during busy periods, such as around Christmas.

Employers might choose to hire someone on a casual basis when they want to have people on standby, but don’t have enough work available to hire someone on permanently. For example, it’s common for retail outlets to hire casual workers over the busty Christmas period, when they need the extra person power. For you, it might work because you’re already working one job or studying or any other reason that means you’d like to have a bit of flexibility in when you work.

Casual staff are still entitled to many of New Zealand’s employment rights. However, there are a few important exceptions:

Annual leave entitlements: given that you probably won’t have regular hours when employed on a casual contract, it might not be easy to schedule annual holidays in the same way that someone on a permanent contract would. As such, it’s quite common for employers to simply pay casual staff an extra 8% on top of their salary instead.
Other types of leave: as a casual employee, you’ll become entitled to sick and bereavement leave after 6 months of having worked for that employer, if you have:
- Worked an average of 10 hours per week, and
- Worked at least 40 hours a month or one hour per week.
Dismissal protocols: technically, every time you start a new stint of casual work after some time off (even if it’s only a few days), is classed as a new period of employment. This means that, if the employer chooses to never offer you work again, it doesn’t count as you being dismissed. But, if an employer offers you a shift and then retracts this offer, it could count as a dismissal, as it could if they send you home mid shift.