Termination Of Employment Guide

Termination of employment means ending the legal relationship between an employer and an employee. This covers resignations, dismissals, redundancies, and summary (instant) terminations.

For New Zealand businesses, getting terminations right is critical. Missteps can lead to personal grievances, unfair dismissal claims, reputational risk, or fines. Many small Auckland firms are surprised how complex “just letting someone go” can be under NZ employment law (especially under the Employment Relations Act 2000). This matters whether you're a startup in Auckland central, a regional business in Northland, or a remote outfit in Queenstown. The rules apply everywhere.

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In this guide you’ll learn:

• What the legal rules are for termination of employment in NZ
• What “fair process” means and how to follow it
• Notice periods, leave-in-lieu, and final pay obligations
• When immediate (summary) termination is allowed
• Risks of unfair or wrongful termination and how to reduce them

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What Are The Rules For Termination Of Employment In New Zealand?

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Under the Employment Relations Act 2000, employers can only terminate employment if they have a good reason and act in a fair and reasonable way.

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According to Employment New Zealand, dismissals must follow fair process and can’t be harsh or unjust. If an employer fails to do this, the employee may raise a personal grievance for unjustified dismissal within 90 days of termination.

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For senior roles, note that employees earning above $180,000 per year may soon be limited in raising personal grievance claims, according to MBIE’s announcement.

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Types Of Termination

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Here are the common types:

• Resignation
  Employee gives notice to leave.
  Key notes: Must give correct notice as per the employment agreement. Employer should accept in writing.
• Dismissal / Termination by Employer
  Employer ends employment for cause or business need.
  Key notes: Must follow a fair process and have valid grounds.
• Redundancy / Restructuring
  Employer no longer requires the role.
  Key notes: Treated as a dismissal but must be justified by genuine business reasons. Employer must consult and consider alternatives.
• Summary (Instant) Termination
  Immediate termination without notice.
  Key notes: Only permitted in cases of serious misconduct.

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How Many Warnings Before Termination?

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There’s no fixed number of warnings required before termination in New Zealand. The key is fairness. Employers should raise concerns early, give warnings, offer support, and allow time to improve performance.

For serious misconduct, immediate termination may be justified;  but the employer must still investigate and let the employee respond.

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For example, a café in Auckland once fired a staff member for repeated lateness without written warnings. The case went to the Employment Relations Authority, and the employee won due to lack of documentation and fair process.

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Notice Period For Termination Of Employment

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Legal Requirements

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There’s no fixed statutory notice period in NZ. Instead, the notice period must be stated in the employment agreement. Employment NZ recommends 2 to 4 weeks for most roles, depending on seniority and industry.

If the contract is silent, the employer must give reasonable notice, which varies by role and circumstances.

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Pay in Lieu of Notice

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Employers may choose to pay the employee instead of having them work out their notice. This is sometimes called “garden leave” or payment in lieu. See Business.govt.nz for details.

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If the Employee Fails to Give Notice

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If an employee leaves without proper notice, the employer may deduct wages for the unworked notice period; but only if the contract allows it

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How To Terminate Employment Fairly

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A fair and reasonable process includes:

1. Investigation – gather facts, documents, and statements.
2. Communication – inform the employee in writing and invite them to a meeting.
3. Opportunity to Respond – give the employee a genuine chance to explain.
4. Decision – decide fairly and document reasoning.
5. Termination Letter – provide written notice or pay in lieu.
6. Final Pay – pay outstanding wages, leave, and holiday pay

Failure to follow this process may lead to a successful unfair dismissal claim, even if the reason for termination was valid.

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Unfair or Wrongful Termination

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If an employee believes they were unfairly dismissed, they can raise a personal grievance within 90 days under the Employment Relations Act.

The Employment Relations Authority will check:

• Was there a valid reason for dismissal?
• Was fair process followed?
• Was the employer’s action reasonable in the circumstances?

If the dismissal is found to be unjustified, remedies can include reinstatement, lost wages, or compensation.

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Key Takeaways For Employers And Employees

• Always follow a fair and reasonable process when considering termination.
• Make sure all employment agreements clearly outline notice periods and reasons for termination.
• Keep records of all meetings, warnings, and communications.
• Understand your rights under NZ employment law before acting.
• Employers should seek professional HR or legal advice for complex terminations.
• Employees should ask for written reasons if dismissed and can seek help from Community Law Centres or Employment if they believe a termination was unfair.
• Clear, transparent communication and respect on both sides help maintain trust, even when employment ends.

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