When Is Your Position Untenable?

Resignations are a normal part of running a small business - but they can still catch you off guard.

One day, an employee is showing up as usual. The next, they’re telling you their position has become “untenable” and handing in a resignation letter. If you don’t handle the process carefully, you can end up with operational gaps, payroll issues, privacy missteps, or even an employment dispute.

This guide is designed for New Zealand employers who want to handle resignations properly from day one. We’ll cover what “untenable” usually means in practice, what a resignation letter in New Zealand should include, notice periods, final pay, handovers, and what to do if the resignation comes out of the blue (or looks more like a “forced resignation”).

What Does “Untenable Position” Mean (And Why It Matters For Employers)?

In everyday language, an employee saying their position is “untenable” usually means they feel they can’t reasonably stay in the job anymore.

For you as an employer, this phrase matters because it can be a sign of:

a genuine personal decision to resign (for example, health, family, relocation, burnout), or
a complaint that the workplace or the role has become so difficult that they feel they have no real choice but to resign.

That second scenario can create legal risk if the resignation is later argued to be a form of constructive dismissal (where an employee claims they were effectively pushed out).

Common “Untenable” Triggers In Small Businesses

Every workplace is different, but we often see “untenable” raised around:

Workload and stress (especially in lean teams where roles expand quickly)
Breakdowns in communication with managers or owners
Changes to hours or duties without proper consultation
Workplace conflict (bullying, harassment, ongoing friction)
Health concerns, including mental health
Performance management handled informally or abruptly

Even when you believe you’ve done the right thing, a resignation framed as “untenable” is a prompt to slow down and make sure your process is fair and well documented.

If the resignation appears linked to health or stress, you’ll also want to be mindful of your health and safety obligations under the Health and Safety at Work Act 2015. That doesn’t mean you can’t accept the resignation - it means you should respond appropriately, respectfully, and consistently.

In some cases, employees may ask for a short break instead of resigning, and it can help to understand your options around sick leave and wellbeing - issues we discuss in Mental Health Day Off Work.

What Should A Resignation Letter Include In New Zealand?

From an employer’s perspective, a resignation letter is helpful because it creates a clear written record of what the employee is doing and when. It helps you manage notice periods, plan the handover, and calculate final pay.

In a resignation letter (or resignation email) in New Zealand, employees typically include:

The date the letter/email is written
A clear statement that they are resigning
Their last day of work (or notice period, if last day isn’t calculated)
A short, neutral reason (optional - many resignations don’t need one)
A handover offer (optional but useful)
Their name and signature (or name typed at the end of an email)

Do They Have To Resign In Writing?

Often, resignations happen verbally first (for example, a conversation in the office or over the phone), but it’s best practice to confirm the resignation in writing either way.

If the employee resigns verbally, you can respond with a polite email that summarises what they said and asks them to confirm their last day. This protects both sides and reduces confusion later.

Template: Simple Resignation Letter (For Employees To Use, And Employers To Recognise)

Here’s a basic example you’ll commonly see in New Zealand. As the employer, you don’t need to “approve” the wording, but it’s useful to know what a clear resignation looks like:

Subject: Resignation

Dear ,

Please accept this letter as formal notice of my resignation from my position as at .

In accordance with my employment agreement, my final day of work will be .

Thank you for the opportunities during my employment. I will do what I can to ensure a smooth handover before I finish.

Kind regards,

If you receive something vague like “I’m done” or “I quit effective immediately” with no date, don’t guess - clarify in writing what they mean and what date they intend as their last day.

Notice Periods: What You Can (And Can’t) Require When Someone Resigns

In New Zealand, notice requirements usually come from the employment agreement and the Employment Relations Act 2000 (which underpins good faith obligations in employment relationships).

As a starting point, check the employee’s Employment Contract for:

the notice period (for example, 1 week, 2 weeks, 4 weeks)
whether notice must be in writing
any rules about taking annual leave during notice
whether you can place the employee on garden leave (if included)

Can An Employee Resign Without Notice?

Sometimes, yes - but it may be a breach of their employment agreement, and it creates real practical issues for you.

If an employee stops turning up, resigns “effective immediately”, or otherwise appears to have left without working notice, you should still manage it carefully. You’ll usually want to contact them and confirm in writing what they intend, what their last day will be treated as, and how final pay will be handled (and keep records of your attempts to clarify things).

We go into the risks and practical steps in Resigns Without Notice.

Can You Pay In Lieu Of Notice?

In some situations, you may prefer the employee not work out their notice period (for example, where there’s a client relationship risk, sensitive information, or it would be disruptive). Depending on what the employment agreement says (and what you and the employee agree), you may be able to end employment sooner by paying out all or part of the notice period instead.

This is often called “payment in lieu of notice”. It needs to be handled carefully so you don’t accidentally underpay or create confusion about entitlements. For a deeper explanation, see Payment In Lieu Of Notice.

What If The “Resignation” Looks Forced?

A resignation can become risky if an employee later claims they were pressured, threatened, or given an ultimatum.

Red flags include:

you suggested resignation as the “only option”
you offered a resignation letter template during a disciplinary meeting
you told them “resign or be fired” without a fair process
the resignation came immediately after you changed their hours/duties without consultation

If you’re changing working hours or making role changes, it’s important to do this lawfully and with good faith consultation - otherwise a resignation that follows can be framed as the employee having “no real choice”. This comes up often in Reducing Staff Hours.

How To Respond To A Resignation Letter: A Step-By-Step Employer Checklist

When you receive a resignation letter (or resignation email), aim to respond quickly, calmly, and in writing.

1) Acknowledge The Resignation In Writing

Send a short email confirming:

that you’ve received their resignation
their last working day (based on their notice period)
who they should speak to about handover, timesheets, and equipment return

This email becomes your internal reference point if questions arise later.

2) Confirm Notice Period And Any Changes To It

If the employee proposes a last day that’s shorter than their notice period, don’t just accept it informally. Decide whether you:

agree to waive notice (in writing),
require them to work out notice, or
offer payment in lieu (if appropriate).

Whatever you decide, document it so there’s no dispute about what was agreed.

3) Plan The Handover And Protect Confidential Information

In a small business, handovers can be the difference between a smooth transition and weeks of disruption.

Consider:

client communications and who will take over relationships
passwords, software access, and shared inboxes
where key documents are stored
what work is in progress and deadlines
any confidentiality obligations that continue after employment ends

Keep privacy in mind as well. If you’re notifying customers or suppliers, avoid sharing unnecessary personal details about the employee’s reasons for leaving. The Privacy Act 2020 requires you to handle personal information carefully and only use/disclose it for proper purposes.

4) Organise Company Property Return

Have a simple checklist of business property to be returned, such as:

keys and security cards
uniforms
laptops, phones, chargers
vehicles (if relevant)
tools and equipment

If you intend to deduct anything from wages (for example, unreturned equipment), be cautious: deductions are regulated and generally need written consent (this is often dealt with in the employment agreement or separately).

5) Run A Clean Offboarding Process

Even if the resignation is tense, a professional offboarding process reduces risk. It also protects your business reputation - especially in close-knit industries.

This is where having clear internal rules helps. A well-drafted Workplace Policy can set expectations around notice, handover, access to systems, exit interviews, and return of property.

Final Pay, Annual Leave, And Other Entitlements: Getting The Numbers Right

Final pay is one of the most common places resignations go wrong - and it’s also one of the easiest areas to keep tidy with a checklist.

In New Zealand, final pay is heavily influenced by the Holidays Act 2003 and the employee’s agreement. Depending on the situation, final pay may include:

wages/salary up to the final day worked
payment for any unused annual holidays (accrued/entitled leave)
any alternative holidays owing (for public holidays worked)
any agreed commission or bonuses (depending on your policy/contract terms)
reimbursements owed

What About Annual Leave During The Notice Period?

Employees sometimes ask to take annual leave during their notice period, or employers want employees to use up leave before they go.

This can be possible, but the rules and process matter. For example, annual leave can be taken by agreement, and there are limited circumstances where an employer can require annual leave to be taken (usually with proper notice and subject to the Holidays Act and the employment agreement). If you’re considering directing annual leave, make sure you understand what’s permitted and document the arrangement clearly.

What If The Employee Has Time Off In Lieu (TOIL)?

If you offer time off in lieu arrangements (or have an informal “we’ll give you time back later” approach), resignations can expose gaps quickly.

Make sure you know what’s owed, what’s recorded, and how it will be handled at the end of employment. It’s worth tightening your approach with a clear policy like Time Off In Lieu.

Be Careful With Deductions

It’s tempting to “square up” money in the final pay (for example, deducting for training costs, equipment, or negative leave balances). But deductions can create disputes fast if they’re not clearly authorised.

If you think deductions might apply in your situation, it’s a good idea to get specific advice before payroll is processed.

How To Reduce Disruption When Key Staff Resign

When someone resigns, the legal steps are only part of the picture. The other part is keeping your business running.

Set Up Resignation-Ready Systems (Before You Need Them)

It’s much easier to manage resignations when you’ve already built some “business resilience” into your operations, such as:

up-to-date role descriptions and process documents
shared passwords managed securely (not living in one person’s head)
a simple cross-training plan (so at least two people can do key tasks)
clear employment agreements and policies that define notice and handover expectations

Don’t Overpromise When Communicating To Clients

If the resigning employee managed important clients, you’ll likely need to let clients know there’s a change.

Try to keep communications:

brief (focus on continuity and next steps)
professional (no blame or personal details)
accurate (don’t promise service levels you can’t meet during transition)

This is also where good contractual documentation matters. If you have customer or service contracts that require certain response times or key-person commitments, resignations can trigger breach risks. Knowing your obligations early helps you plan properly.

Key Takeaways

A resignation described as “untenable” can be a normal resignation, but it can also be a warning sign that the employee may later allege they had no real choice - so keep your process calm, fair, and well documented.
A clear resignation letter (or resignation email) should confirm the resignation, include a last day, and align with the notice period in the employment agreement.
Always acknowledge resignations in writing and confirm key details like the last day of work, handover expectations, and return of business property.
Notice periods usually come from the employment agreement, and changes to notice (including paying in lieu) should be documented to avoid confusion and disputes.
Final pay needs careful attention under the Holidays Act 2003, including annual leave payouts and other entitlements like alternative holidays or agreed TOIL.
Having strong employment documents and workplace policies in place makes resignations far easier to manage and reduces the risk of disputes.

If you’d like help reviewing your employment agreements, managing a tricky resignation, or tightening your offboarding process, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.

When Is Your Position Untenable? Resignation Letters In New Zealand