Contract Milking

Ready-made contracts simplify the process

As another long day draws to an end, and as the temperature starts to drop, Farmer Freddy begins his slow march back to the house - his mind set on a quiet evening next to the fire.

“Hi Dad!” yells Pebbles, as her somewhat startled father opens the door to his house. “I’ve got something to show you.”

“And what might that be, Pebbles?” Freddy enquires as he hangs his coat up for the night.

“A while ago you were complaining about not having enough time to get things done around the farm - well I’ve got a solution!”

“This right here,” continues Pebbles as she waives a thin document in the air, “is a contract I purchased from the Federated Farmers website. This will allow you to finally hire someone to help you on the farm!” she says with a great big smile.

“That’s great, Pebbles, but I’m really not sure I’m up to organising another employee right now,” replies Freddy. “There’s actually a huge amount of work involved.”

“I understand that, Dad, but you can’t keep working at the rate you have been. You’ll burn out. And in any case, this is not an employment contract – it’s a Contract Milking Agreement so the person you appoint will not be an employee.”

“What’s the difference?” asks Freddy, wondering why his daughter doesn’t have something better to do on a Thursday night.

“Well, to name a few, employees are subject to the Employment Relations Act 2000, are required to have PAYE deducted from their wages and are not eligible to charge or claim for GST. Contract milkers on the other hand, under the terms of this agreement, are not covered by the Employment Relations Act 2000, are allowed to deduct certain expenses incurred in the course of their work and are required to account to the IRD for their own tax and ACC payments. The particulars of the agreement can all be specified so that the person you contract knows exactly what their responsibilities are and just gets on with them.”

“I must admit that having another person around who can look after themself and get on with the job does sound pretty good. But it’s a big financial commitment and what if things get hard and I can’t afford to keep paying them?” asks Freddy.

“That’s simple, actually,” replies Pebbles as she switches into lawyer mode. “Most standard form contracts have clauses to deal with situations like that. This one, for example, provides for a contract term of 2 years, but gives either party the option to terminate at the end of each season. That way, if things do get tough, you will have the option to terminate the contract early – of course that is something which you would never want to do lightly as the person you’re contracting with will be expecting to work the full term of the agreement.”

“Ok, but what happens if they don’t end up working like they’re meant to? If they’re not an employee, how do I dismiss them?” enquires Freddy.

“Again, the contract will deal with that. There will be a mechanism in the contract which sets out the proper procedure for that situation.”

“How about I leave this here for you to read and we can have a chat about it next week?” suggests Pebbles as she sets the contract down on the table and makes her way to the door. “Make a list of anything you’re not sure about and we can go over the options.”

“That sounds good, thanks Pebbles,” replies Freddy.

“But Dad,” says Pebbles with a pause. “Do actually read it – it’s important to understand exactly how the contract works.”

“I’m on to it,” replies Freddy with a wink as he shows his daughter out.

The content of this document is necessarily general and readers should seek specific advice on particular matters and not rely solely on this document.

If you would like more information on any of the topics in this document, please contact your usual Auld Brewer Mazengarb & McEwen adviser. 


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