Can You Stand Down Employees Without Pay In New Zealand?

If you run a small business, there are times when work can dry up overnight. A key client cancels. A supplier can’t deliver. A flood damages your premises. A health and safety issue shuts a site down.

In moments like these, it’s normal to wonder whether you can “stand down” staff until things return to normal - and whether you can do it without pay.

The short (and frustrating) reality in New Zealand is: you generally can’t stand employees down without pay just because business is slow. In most cases, if your employee is ready, willing, and able to work, you’ll still need to pay them unless there’s a clear legal basis not to.

Below, we’ll break down what a stand down is in NZ, when (if ever) you can stand down employees without pay, how it differs from suspension, and what to do instead if you need urgent cost relief.

What Does “Stand Down” Mean In New Zealand?

In everyday business language, “stand down” often means telling employees not to attend work (temporarily), usually because:

• you don’t have work for them right now;
• you can’t operate (eg, premises closed or equipment unavailable); or
• you’re waiting for an event to pass (eg, compliance issue, repair, supply chain disruption).

In legal terms, though, what matters is the employment agreement and the wider employment law framework. New Zealand doesn’t have a broad, automatic employer right to stand employees down without pay just because trading conditions change.

As a starting point, if your employee is:

• ready to work (they’re available for their rostered hours),
• willing to work (they haven’t refused), and
• able to work (they’re fit, qualified, and allowed to work),

then you generally need to pay them for the work you’ve agreed to provide - even if you temporarily don’t have tasks for them. This is why an unpaid stand down is a high-risk move if you don’t have the right wording and process behind it (and, in some cases, a genuine agreement).

If you’re unsure what your agreements allow, it’s worth reviewing your Employment Contract wording before you take action, because the details matter.

When Can You Stand Down Employees Without Pay?

To stand down employees without pay lawfully, you usually need a solid legal “hook”. Common examples include contractual rights, situations where the employee is not actually ready/willing/able to work, or specific employment relations scenarios.

1) If The Employment Agreement Has A Valid Stand Down / Lay-Off Clause

The most straightforward scenario is where the employment agreement includes a clear clause allowing a temporary lay-off or stand down in defined circumstances (and explains whether it’s paid or unpaid).

Even then, you should be cautious. A clause isn’t a free pass to do whatever you want - it still needs to be:

• clear (not vague or open-ended);
• reasonable in how it operates;
• used in good faith (not as a punishment or to avoid other obligations); and
• applied fairly and consistently.

If you’re relying on a clause, document why it applies, how long the stand down is expected to last, and when you’ll review it.

2) If Employees Aren’t “Ready, Willing, And Able” To Work

Sometimes the issue isn’t that you have no work - it’s that the employee can’t perform their work. In those situations, being unpaid may be lawful depending on the reason, the employment agreement, and any applicable minimum entitlements.

Examples may include:

• the employee is sick or injured (they may use sick leave under the Holidays Act 2003 if entitled);
• the employee can’t lawfully work (eg, visa/work eligibility issue);
• the employee refuses to work without a lawful reason (bearing in mind employees may have lawful reasons to refuse, including where work is unsafe).

Be careful here: there’s a big difference between someone being unable to work, and you telling them not to come in because you don’t have shifts. Don’t assume “no work available” automatically means you can stop paying.

3) If It’s A Lawful Response To A Partial Strike (Rare For Small Businesses)

The Employment Relations Act 2000 has specific rules around industrial action. In limited circumstances, employers may be able to respond to a partial strike by not accepting the partial performance and not paying wages (or making permitted deductions).

For most small businesses, this is not the typical stand down scenario - but it’s worth mentioning because “stand down without pay” sometimes gets mixed up with industrial action rules.

4) If You Negotiate A Temporary Variation (With Genuine Agreement)

In practice, many “stand downs” happen because the business and employee agree to a temporary change - for example:

• a period of unpaid leave;
• reduced hours for a defined period;
• a temporary change to duties/rosters.

The key word is agree. You can propose changes, but you generally can’t force them without contractual power. Any variation should be recorded in writing so everyone is clear on what’s happening and for how long.

If you’re considering a restructure or cost-reduction plan, it can help to align the approach with your wider Workplace Policy framework (and make sure your managers are applying it consistently).

5) If There’s A Genuine Safety Reason (But Pay Still Needs Care)

Under the Health and Safety at Work Act 2015, you have a duty to keep workers safe. If there’s a real safety risk (eg, unsafe premises, serious hazard, not enough trained staff), you may need to stop work immediately.

However, a safety shutdown doesn’t automatically mean employees can be stood down without pay. Pay outcomes often depend on the specific facts and documents - including whether employees are otherwise ready, willing, and able to work; whether alternative work is available; what the employment agreement allows; and how the risk arose and is being managed.

Because this area gets complex quickly, it’s often worth getting tailored advice early - ideally before any stand down happens.

Stand Down Vs Suspension: What’s The Difference (And Why It Matters)?

“Stand down” and “suspension” are often used interchangeably in casual conversation, but legally they’re very different - and mixing them up can cause major risk for your business.

Stand Down (Usually Operational)

A stand down is typically about the business not being able to provide work temporarily (eg, closure, disruption, lack of work). It’s not necessarily linked to employee misconduct.

If you stand down staff, you should be able to clearly explain:

• what has changed operationally;
• why the work can’t be done; and
• why the stand down is necessary and temporary.

Suspension (Usually Disciplinary / Investigation-Related)

Suspension usually happens when you’re dealing with a serious workplace issue - for example, alleged misconduct, safety breaches, bullying complaints, fraud, or serious performance concerns.

Suspension has its own rules. In most cases, suspension is commonly treated as paid unless there’s a clear contractual basis to suspend without pay and it’s justified, reasonable, and carried out with a fair process. Unpaid suspension is generally high-risk and can lead to personal grievance claims if mishandled.

If you’re investigating behaviour or capability concerns, you’ll usually be better off following a proper process rather than reaching for an unpaid stand down. This is where guidance around Performance Management and disciplinary pathways becomes important.

Put simply: if the real issue is conduct or performance, treat it like a conduct/performance issue - not an operational stand down.

A Practical Checklist Before You Stand Down Any Employee

Even if you think you have a lawful basis, the way you handle the stand down matters. NZ employment law places a strong focus on process, good faith, and fairness.

Here’s a practical step-by-step checklist you can use before you stand down employees without pay.

Step 1: Check The Employment Agreement (And Any Policies)

Start with the contract wording. Look for clauses dealing with:

• hours of work (guaranteed vs rostered);
• lay-off / stand down provisions;
• force majeure / business interruption wording (if included);
• alternative duties or temporary variations; and
• shutdown periods (if relevant).

If you don’t have a written agreement, or it’s outdated, it’s worth fixing that sooner rather than later. A tailored Employment Contract can prevent a lot of confusion when things go wrong.

Step 2: Be Clear On The Real Reason (Operational Vs Employee-Related)

Ask yourself:

• Is this truly a lack of work / inability to operate?
• Or is this actually about an employee’s conduct, capability, or availability?

This matters because the correct legal pathway (and risk) is different depending on what’s really going on.

Step 3: Consider Reasonable Alternatives First

Before you go straight to an unpaid stand down, consider whether you can:

• reassign duties temporarily;
• offer remote work (if possible);
• reduce hours by agreement;
• use annual leave (with the correct notice rules); or
• agree on unpaid leave for a short period.

In many cases, presenting options (instead of a single ultimatum) is the difference between a workable solution and a dispute.

Step 4: Consult And Communicate In Good Faith

Under the Employment Relations Act 2000, employers and employees must deal with each other in good faith. In a stand down context, that usually means:

• telling employees what’s happening and why;
• sharing relevant information (at a sensible level);
• giving them a chance to respond; and
• genuinely considering their feedback.

If you’re making decisions that affect pay, hours, or job security, a “quick email the night before” approach can backfire fast.

Step 5: Put The Outcome In Writing

Once you’ve decided on the path forward, confirm it in writing. Include:

• the start date and expected end date (or review date);
• whether the stand down is paid or unpaid (and the contractual basis);
• what employees need to do (remain available? check in weekly?);
• how you’ll communicate updates; and
• any agreed leave arrangements.

This isn’t about being formal for the sake of it - it’s about avoiding misunderstandings that turn into claims later.

Alternatives To Standing Down Employees Without Pay

If you’re reading this because cash flow is tight, you’re not alone. The good news is there are usually several lawful options you can explore before you resort to standing down employees without pay.

1) Reduce Hours (But Usually Only By Agreement)

Many small businesses try to manage downturns by reducing shifts or moving to shorter weeks.

Whether you can do this depends on:

• what hours are guaranteed in the employment agreement;
• whether the role is genuinely variable/rostered; and
• whether you can reach agreement to vary hours temporarily.

If you need a lasting reduction rather than a temporary change, you may be moving into restructure territory (which requires a fair process).

2) Annual Leave (Including Employer-Directed Leave Rules)

Annual leave can be a practical tool during a slowdown, but you need to follow the Holidays Act rules. For example, employers can require employees to take annual leave in some situations, but (outside of certain shutdown/closedown scenarios) this is generally expected to be done with at least 14 days’ notice.

If you’re considering annual leave as a lever, make sure you’re not accidentally breaching minimum entitlements or using leave in a way that could be seen as unfair pressure.

3) Short-Term Unpaid Leave (By Mutual Agreement)

Sometimes the simplest solution is a mutually agreed unpaid leave arrangement, particularly if:

• the stand down would only be for a short period;
• the employee is open to it (eg, they have other commitments); and
• you document it clearly (dates, expectations, return to work).

Just be careful not to “dress up” a forced stand down as an “agreement”. If the employee doesn’t genuinely have a choice, that can still create risk.

4) Restructure Or Redundancy (If The Business Fundamentally Can’t Sustain The Role)

If the downturn isn’t temporary - and you genuinely can’t sustain the position - you may need to consider a restructure or redundancy process.

This is a big step, but it can be the right one when the alternative is slowly drifting into unpaid stand downs and ongoing uncertainty.

Redundancy needs to be handled carefully in NZ, including proper consultation, genuine business reasons, and compliance with notice/entitlements. If this is on your radar, getting help early through Redundancy Advice can save you a lot of time (and reduce the risk of an expensive dispute later).

5) Use Contractors For Peaks (And Employees For Core Work)

If your staffing model is the real issue (eg, you’re carrying fixed wages for variable demand), you might consider whether some work is better suited to contractors going forward.

That said, contractor arrangements need to be set up properly - misclassification is a common and costly mistake. If you’re changing your approach, it’s worth checking the structure and documentation with an Employment Lawyer.

Key Takeaways

• In New Zealand, you generally can’t stand employees down without pay just because business is slow - if an employee is ready, willing, and able to work, wages are usually still payable unless a lawful basis applies (often in the employment agreement).
• The safest path is where your employment agreement includes a clear, enforceable stand down/lay-off clause, and you still follow a fair, good faith process.
• Stand down (operational/no work) is different from suspension (disciplinary/investigation). Mixing them up can create significant legal risk, especially around pay.
• Before implementing any unpaid stand down, check the contract, confirm the real reason, consult with employees, consider alternatives, and confirm outcomes in writing.
• Often, better options include agreed reduced hours, annual leave used correctly (including notice requirements), short-term agreed unpaid leave, or (if necessary) a properly run restructure/redundancy process.
• If you’re unsure, get advice early - it’s usually far cheaper than dealing with a personal grievance after the fact.

General information only. This article is not legal advice and may not reflect your specific circumstances. If you need advice, get in touch for tailored guidance.

If you’d like help reviewing your options before you stand down employees without pay (or drafting the right clauses and documents), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.