Ending an employment relationship

When it comes to ending an employment relationship with a staff-member, your responsibilities as an employer won’t always be the same.

This is because that relationship can end under a variety of different scenarios that contain rules you need to respect to ensure the fair treatment of your employees. If you don’t, you could face both financial and non-financial penalties from a personal grievance case.

On this page:

• Fixed-term agreements
• Resignations
• Retirement
• Dismissal
• Redundancy

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Fixed-term agreements

Fixed-term agreements are used for roles with a set end date, such as a position involved in project management or maternity cover. These types of roles must always end on the date specified in the employment agreement or after the job or project being worked on has been completed.

However, fixed-term agreements must have a genuine reason for being fixed-term, rather than being used as a type of trial period. If you try to end employment for a fixed-term employee who believes their position is permanent, you could face a personal grievance case for unjustified dismissal.

This is why it’s vital that fixed-term clauses are added to all employee agreements for roles requiring set end dates or project-based considerations, and that the fixed-term nature of the roles are clearly communicated to the people applying for them.

Find out What to put in employment agreements.

Use the Ministry of Business Innovation and Employment – Labour’s Employment Agreement Builder.

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Resignations

Any of your employees can resign at any time, but they should give you reasonable notice of their intentions to leave the business so you can prepare to adjust to their absence or hire a new employee to replace them.

“Reasonable notice” should be a time period defined in the employment agreement you negotiated with the employee when they joined, but it isn’t a mandatory clause.

You should never demand longer notice than what’s already been agreed to in the employment contract. If you do, you could face a personal grievance case for breaking the employment agreement.

Once the required notice has been given:

• You must pay the employee to the end of the notice period, unless the employee is justifiably dismissed. The employment relationship continues until that date.
• You can ask the employee to stop coming into work before the end of their notice period, but if you do you must still pay them to the end of their notice period. If pay is stopped before the end, the employee may be able to claim for wages owed.
• If an employee leaves work without giving notice, you’re not required to pay for time beyond the employee’s last actual working day.
• You must not deduct pay in lieu of notice from any amount owed to the employee, unless the employee agrees in writing or the employment agreement specifically allows it.
• You must pay all holiday pay owing to the employee in their final payslip.

Find out more about resignations with the Ministry of Business Innovation and Employment – Labour.

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Retirement

There is no mandatory age of retirement in New Zealand and you cannot discriminate against an employee based on their age by asking them to retire.

The only exception is if:

• the active employment agreement was in force prior to April 1 1992
• it specifically states a retirement age as a clause
• you and the employee both agreed in writing to confirm or change that retirement age on or after April 1 1992.

Only if all three conditions are in place does the employee have to retire at the age stated in their employment agreement.

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Dismissal

To avoid a personal grievance case when dismissing an employee, you must always make sure you have good reason for the dismissal and that it’s carried out in a fair way.

It must be clear from the start what the job requires, what behaviour is expected, and what could lead to dismissal.

Dismissal during a trial period

If you employ 19 or fewer people, you can include a trial period of up to 90 days in the employment agreements you offer.

If you dismiss an employee in this time, they cannot bring a personal grievance case against you or your business for unjustified dismissal. However, they can still do so under other grounds such as discrimination.

Find out more about Trials and probations.

Find out about dismissals with the Ministry of Business Innovation and Employment – Labour.

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Redundancy

You must have a genuine reason for making an employee redundant, whether the reason is increasing business efficiency or closing down the business as a whole.

If you don’t have a genuine reason for making an employee redundant, they could bring a personal grievance against you or your business for unjustified dismissal.

Compensation

There is no automatic right to compensation if an employee has been or is about to be made redundant. You have to agree to it in negotiations with employees or a union.

Negotiating any compensation – and its size - can be done before or after an actual redundancy is planned.

However, in some restructuring situations, employees (who do certain catering, cleaning, caretaking, laundry and orderly work) can ask the Employment Relations Authority to decide what redundancy entitlements they should receive.

Find out more about Restructuring and redundancy and Resolving employee disputes.