Are You Getting it Right With Your Casual Employees? The Distinction Between Casual and Part-Time Employees in Practice and the Pitfalls Employers can Face When They Get it Wrong!

Casual employees are commonplace in many businesses and a useful resource that allows flexibility in meeting employers' needs.  However, too many employers fail to recognise the difference between casual and permanent full and part-time employees, including the key differences in employment rights, responsibilities and entitlements. It is important that employers understand the distinction to avoid unwanted consequences.

Although there is no statutory definition of a casual employee in employment legislation, it is generally accepted that where an employee is employed on an “as and when required” basis with no guaranteed hours of work, no regular pattern of work and no ongoing expectation of employment, he/she is a "casual".  As such, there is no obligation on the employer to offer work and a casual employee does not have to accept work, if and when it is offered.  On each occasion work is offered by the employer and accepted by the casual employee, it is treated as a separate and distinct period of employment. The most common indicator of a casual employment arrangement is the inclusion of holiday pay (usually 8%) in the hourly rate being "pay as you go" holiday pay as provided for under the Holidays Act. However, it should not be assumed that a casual employment arrangement will automatically qualify for annual holiday pay on a pay as you go basis, as it is the employee's work position that qualifies them to the entitlement rather than the employment agreement type. To be paid holiday pay inclusive in the hourly pay rate the employee's nature of work must be irregular or intermittent and as a result it is not presumable or practicable to provide four weeks annual leave.  It is also critical that the separate 8% holiday pay is clearly and separately identified in the hourly rate paid.

The most common pitfall employers face is where the work of a casual employee becomes ongoing and regular, and there is effectively continuity of the employment relationship.  In these circumstances, even if the employee was genuinely employed on a casual initially and continues to be described as “casual”, the employee can still later become, in terms of the "real nature of the relationship" between the parties, a permanent part-time employee. This test, in short, goes to the substance of the employment relationship, and almost always prevails over the form of any agreement.

The consequences of continuity and consistency of employment may include the employee then becoming entitled to annual holidays (even where the employee has already received 8% “pay as you go” holiday pay), and payment of public holidays not worked that would otherwise have been working days and alternative holidays.  Furthermore, if the employment comes to an end against the employee’s will without good reason and/or a fair process, the employer may also be found to have unjustifiably dismissed the employee. To avoid these pitfalls, more employers are now engaging "pools" of casual workers who can be employed on short notice on an individual basis, or as part of a team where the relevant work to complete requires. The temptation for the employer is to use the same person for each new assignment, particularly where he/she has a proven track record, although doing so does have the potential for "familiarity to breed contempt".

It is therefore essential that employers get it right and do not mistake their casual employees with part-time employees to avoid these pitfalls. If you are unsure about your employees and to ensure your business has the correct employment arrangements in place, please get in contact with our employment law specialists:

Auckland Office    
Craig Andrews on (09) 306 6745 (candrews@mcveaghfleming.co.nz)    
John Burley on (09) 306 6741 (jburley@mcveaghfleming.co.nz)    

Albany Office    
James Turner on (09) 966 3603 (jturner@mcveaghfleming.co.nz)

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Employment Law