Termination: Key Considerations When Dismissing an Employee in New Zealand

There are various reasons you may want to dismiss an employee. It could be due to poor performance, bullying and harassment or perhaps you no longer require that position of employment due to a restructure of the business. Notably, you must follow certain requirements and processes when dismissing an employee. If you do not follow the necessary processes, there is a risk that the employee may bring a personal grievance claim against you. This article explains the key factors you should consider when dismissing an employee.

What is a Personal Grievance Claim? 

If you do not have a good reason to dismiss or terminate your employee, then they may bring a personal grievance claim against your business. This is a type of complaint that workers can bring against a current or former employer relating to issues of:

• unjustifiable dismissal;
• discrimination;
• harassment; or
• any action which disadvantages the employee. 

The employee has 90 days from the date they become aware of the issues of their dismissal to bring a claim against you.

Reasons for Dismissal

There are various reasons why an employer may want to dismiss an employee, including:

• serious misconduct;
• repeated misconduct;
• performance issues;
• issues during a trial period;
• redundancy;
• incompatibility; and
• incapacity.

If you dismiss the employee outside of their trial period, they will have the right to ask you for a written statement of the reasons for their dismissal. The employee must make this request within 60 days of finding out about their dismissal. You must provide the written statement within 14 days. If you fail to provide the statement, the employee may be entitled to make their personal grievance claim outside of the general 90 day limitation period.

Process Before Termination of Employment

If you want to dismiss an employee, you need to carefully think about the process of termination, including:

• acting in good faith;
• having a good reason;
• following a fair and reasonable process;
• having an open mind when dealing with problems so they ensure outcomes are not predetermined.

Good Reason

You must have a good reason for dismissal. A good reason means that:

• you believe that there is a valid reason to begin the action or process; and
• any decision that you make for a good and fair reason.

Fair Process

Fair process depends on: 

• the circumstances surrounding the particular employee; and 
• whether you followed relevant provisions in the employment agreement and your workplace policies. 

This means that you are required by law to follow a process whereby you:

• investigate the matter relating to the employee;
• raise your concerns with the employee in a meeting;
• allow the employee to respond to your concerns; and
• genuinely consider the employee’s response.

Alternatively, if an employee has been performing poorly, you should put a performance plan in place with a reasonable period of time for the employee to improve. If the employee makes no development, you should discuss their progress with them and provide them an opportunity to respond.

Process of Employment Termination 

Notice Period

Once you have followed the processes for dismissing your employee, you need to ensure that you give sufficient notice. Indeed, your employment agreement will likely establish a period of time for which you need to give your employee warning of termination. If your agreement does not specify any notice period, you must provide ‘reasonable notice’ which depends on:

• the employee’s length of service,
• type of job, 
• how long it might take to replace the employee; and
• common practice in the workplace.

Depending on the role, two-to-four weeks’ notice will generally be sufficient.

Entitlements

Upon dismissal, your employee has the right to receive any outstanding entitlements, such as: 

• wages;
• payment in lieu of notice (if relevant); and 
• accrued but untaken annual leave.

Key Takeaways

There may be circumstances in which you need to dismiss an employee due to: 

• a business restructure;
• the employee’s performance; or
• misconduct of an employee.

When dismissing an employee, it is essential to follow a clear process prior to dismissal. You must:

• act in good faith;
• have a good reason for the dismissal;
• follow a fair and reasonable process;
• be transparent in your decision making, by ensuring that outcomes are not predetermined. 

If you need legal advice on your plan to terminate an employee, contact LegalVision’s New Zealand employment lawyers on 0800 005 570 or complete the form on this page.

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