How To Terminate An Employee

An employee’s employment with you can come to an end for many reasons. For instance, they can resign on their own, or you might decide to terminate their employment due to underperformance on their end.

Regardless of the circumstances, there is a specific procedure to follow when terminating an employee. This is to ensure you’re compliant with the law, and that the employee is receiving their correct entitlements upon their departure.

Each company should also have their own policies and processes around offboarding employees (for example, revoking access to their systems) - we’ve written more about this here.

In this article, however, we’ll focus on the legal side of employee termination, from your legal documents to last payments and notice periods.

Employee Termination Procedure: How It Works

Like we mentioned above, termination can arise for many reasons. The main ones are as follows:

• Employee’s resignation
• Redundancy
• Dismissal

Different laws apply to each one, so let’s go through these separately below.

Employee Resignation

If your employee is resigning, they’ll need to provide notice according to the requirements set out in your Employment Contract with them. However, this could also be subject to any collective agreements that apply to them.

For example, your agreement may require that the notice be provided in writing.

In some cases, you can allow your employee to take leave during this notice period (this may require reviewing their current leave entitlements).

Alternatively, you can pay them in lieu of notice and let them depart earlier than expected.

Redundancy

An employee may also leave the company if they are made redundant.

While it’s not ideal, it can be a reality for many companies who no longer have the resources or capacity to employ their workers.

For example, if a business becomes insolvent or bankrupt, redundancy is a likely option for their employees.

If you’re making your employees redundant, you need to ensure that it is genuine. For instance, you need to make sure you’ve consulted with the employee about the redundancy, and shown that there was no possibility of moving the employee to another position in the business.

You’ll also need to pay your employee redundancy pay, provided they meet the criteria. For example, redundancy pay is legally required if the employee has worked for you for more than 12 months.

If you need help, we’ve put together this guide to redundancy.

Dismissal

In some cases, you may need to dismiss your employee - in other words, you may fire your employee.

However, you can’t just fire them for no reason. There need to be valid grounds, such as poor performance or illegal conduct.

Dismissal also requires you to provide notice to the employee. For example, if the employee has worked for 1 year or less, the minimum notice period is 1 week. The requirements around this can be found with the New Zealand Ministry of Business, Innovation and Employment.

It’s important to be careful when dismissing an employee as it could seep into unjustifiable dismissal territory. An employee can bring an unjustifiable dismissal claim against you if they believe the dismissal to be unfair or unjust.

Dismissal can be unjustifiable if it was not done in line with the Employment Relations Act 2000.

We’ve written more about unjustifiable dismissal and how you can avoid it altogether.

Can A Casual Worker Claim Unjustifiable Dismissal?

The short answer here is yes. A casual worker can claim unjustifiable dismissal, but only if their employment with you was systematic and regular, and there is a reasonable expectation of ongoing employment.

It’s best to consult an Employment Lawyer with matters like these as it can get tricky.

How To Terminate An Employee During Probation Period In New Zealand

If you wish to terminate an employee during their probation period, you must do so according to the procedure set out in your Employment Agreement.

This may require preparing written notice and scheduling a meeting with the employee to discuss next steps.

What Is An Employee Termination Payment?

Employee termination payment (ETP) is the lump sum you pay to your employees before they leave. It usually includes any payments for unused leave or payments in lieu of notice.

Accessing Employee Email After Termination

Usually, when an employee leaves a business, anything they created or work they did for you will remain with you (this should be set out in your agreement or through an IP Assignment Deed).

Accordingly, you can still retain access to your worker’s email for a few months after they leave. This is mainly to ensure you don’t miss any important emails or information coming through.

How To Fire A Remote Employee

Since we know there is a specific procedure to follow when terminating employees, a common question that comes up is, ‘How do I terminate a remote employee?’.

Many businesses are based online with their employees working from home. However, like many other employer obligations, this does not exempt you from meeting your termination obligations.

You’re still required to provide notice in line with the laws and any relevant agreements, and set up meetings with them to discuss the process.

Even though each business is different and will have their own separate policies around offboarding, the general rule is that you should be transparent with your employees and actively communicate next steps to avoid missing anything important before they leave.

This also helps employees understand and receive their correct entitlements (this is especially important if they are remote, as communication can be a barrier!).

How To Offboard An Employee

Now that we’ve covered the legal side of employee termination, let’s briefly discuss the administrative side of employee termination.

In the same way a business will onboard an employee, they will need to officially offboard them as well.

The offboarding process will generally involve revoking their access to internal systems, deleting files and confidential information and holding an exit interview.

There can be quite a lot to take in, so we’ve put together this offboarding checklist for your business.

Need Help?

Terminating an employee isn’t easy - it can be a stressful and sensitive process to go through on both ends. In addition to this, both parties need to ensure they meet their obligations under employment laws.

Before going ahead with termination, it’s wise to get a lawyer to review your contracts to ensure you’re following the correct processes.

If you need help, our employment lawyers are more than happy to consult you on your options and your legal obligations. You can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.