How to End an Employment Relationship the Right Way (Without Landing in the ERA)

How to End an Employment Relationship the Right Way (Without Landing in the ERA)

Ending an employment relationship is one of the most challenging decisions an employer can make—and one of the easiest to get wrong.

Whether you're dealing with poor performance, misconduct, redundancy, medical incapacity, or another employment issue, the decision to end someone's employment should never be rushed.

In New Zealand, employers don't just need a valid reason for dismissal. They also need to follow a fair and reasonable process.

Many employers assume that having a legitimate reason is enough. Unfortunately, that's not how employment law works.

In reality, many Employment Relations Authority (ERA) claims arise because the process was flawed—not because the employer lacked a valid reason.

This guide explains what employers should know before ending an employment relationship, the lawful pathways available, and the common mistakes that often lead to personal grievance claims.

Why Process Matters

When employment disputes reach the Employment Relations Authority, one question is commonly asked:

Would a fair and reasonable employer have acted the same way in the same circumstances?

This assessment looks at both:

• Whether there was a genuine and justifiable reason for ending employment.
• Whether the employer followed a fair process before making the decision.

This means an employer may have a legitimate reason to dismiss an employee but still be found to have acted unjustifiably if the process was unfair.

The lesson is simple: a fair process is just as important as a valid reason.

Seven Common Ways Employment Relationships End

Different situations require different processes. Understanding which pathway applies is the first step toward making a legally sound decision.

1. Serious Misconduct

Serious misconduct generally involves behaviour that fundamentally damages the employment relationship.

Examples may include:

• Theft
• Violence
• Fraud
• Serious breaches of health and safety
• Serious dishonesty
• Significant breaches of workplace policies

Although summary dismissal may be appropriate in some circumstances, employers should still:

• Conduct a proper investigation
• Clearly explain the allegations
• Provide supporting information
• Give the employee a genuine opportunity to respond
• Consider the response before making a decision

Summary dismissal should never mean skipping procedural fairness.

2. Poor Performance

Poor performance should generally be managed—not immediately punished.

Before dismissal is considered, employers should usually:

• Clearly explain performance concerns
• Set measurable expectations
• Provide coaching and support
• Allow reasonable time for improvement
• Monitor progress through regular reviews

A Performance Improvement Plan (PIP) is often an effective tool where appropriate.

Dismissal is generally considered only after reasonable opportunities to improve have been provided.

3. Genuine Redundancy

Redundancy is about the position—not the person.

Employers should ensure that:

• There is a genuine business reason
• Employees are consulted before decisions are finalised
• Relevant information is shared
• Feedback is genuinely considered
• Redeployment opportunities are explored where appropriate

A redundancy process should never be used to avoid managing performance or conduct issues.

4. Trial Period Dismissal

A valid trial period can provide flexibility for eligible employers—but only when the legal requirements have been met.

Common mistakes include:

• The employment agreement being signed after employment begins
• Incorrect trial period wording
• Applying trial periods to employees who are not eligible

Even where a valid trial period exists, employers should still act in good faith and follow the agreed contractual process.

5. Medical Incapacity

Sometimes an employee may be unable to continue working because of illness or injury.

Before considering termination, employers should generally:

• Obtain appropriate medical information
• Consult with the employee
• Consider reasonable adjustments
• Explore alternative duties where available
• Assess whether continued employment remains reasonably practicable

Medical incapacity should never be treated as a disciplinary issue.

6. Abandonment of Employment

If an employee stops attending work without explanation, employers should avoid assuming they have abandoned their employment immediately.

Instead, employers should:

• Make genuine attempts to contact the employee
• Keep records of communication
• Allow reasonable time for a response
• Follow any abandonment provisions contained within the employment agreement

7. Mutual Agreement

Sometimes both parties agree that ending the employment relationship is the best outcome.

Where appropriate:

• Ensure discussions are voluntary
• Record the agreement in writing
• Allow the employee the opportunity to seek independent advice
• Clearly outline the agreed terms

A properly documented mutual agreement can help minimise future disputes.

A Practical Employer Checklist Before Dismissal

Before ending an employment relationship, ask yourself:

• ✅ Do I have a genuine reason for taking action?
• ✅ Have I gathered all relevant facts?
• ✅ Have I investigated before reaching a conclusion?
• ✅ Has the employee received all relevant information?
• ✅ Have they had a genuine opportunity to respond?
• ✅ Have I approached the process with an open mind?
• ✅ Have I considered alternatives to dismissal?
• ✅ Have I documented every step?

If the answer to any of these questions is "No", it may be worth reviewing the process before proceeding.

Common Employer Mistakes

Many employment disputes arise because employers:

• Make the decision before the disciplinary meeting
• Rush investigations
• Fail to disclose relevant information
• Confuse performance issues with misconduct
• Use redundancy to remove an individual employee
• Misapply trial periods
• Fail to consult properly
• Keep poor documentation
• Calculate final pay incorrectly
• Ignore good faith obligations

These mistakes can significantly increase legal risk—even where the original concern was valid.

The Importance of Good Faith

Good faith is one of the cornerstones of New Zealand employment law.

Employers are expected to:

• Communicate openly
• Be honest and transparent
• Share relevant information
• Keep an open mind
• Genuinely consider employee feedback before making decisions

Good faith is not simply a legal obligation—it is essential to maintaining respectful and productive workplace relationships.

What Should Final Pay Include?

When employment ends, employers should ensure that all contractual and statutory entitlements are addressed.

Depending on the circumstances, this may include:

• Outstanding wages or salary
• Holiday pay
• Payment for accrued annual leave
• Any other contractual entitlements

Accurate final pay calculations help reduce disputes and demonstrate professionalism.

Frequently Asked Questions

Can I dismiss an employee immediately?

Only in limited circumstances where serious misconduct may justify summary dismissal—and even then, a fair process should generally be followed before making a final decision.

Is having a valid reason enough?

No. Employers generally need both a valid reason and a fair process.

What if the employee admits what happened?

Even where facts appear clear, employers should still provide a fair opportunity for the employee to respond before reaching a final decision.

Can poor performance lead to dismissal?

Potentially—but usually only after the employee has been made aware of the concerns, supported appropriately, and given a reasonable opportunity to improve.

Final Thoughts

Ending an employment relationship is rarely just about making a decision.

It's about following a process that is fair, reasonable, well documented, and consistent with good faith obligations.

Employers who invest time in getting the process right are generally better placed to reduce legal risk, protect workplace relationships, and make confident employment decisions.

When in doubt, seeking advice early is often easier—and far less costly—than defending a personal grievance later.

How Ask Your HR Can Help

Navigating employment terminations can be complex, particularly when performance, misconduct, redundancy, or medical incapacity issues overlap.

At Ask Your HR, we help New Zealand employers:

• Manage disciplinary processes
• Conduct workplace investigations
• Review employment agreements
• Navigate restructures and redundancies
• Manage performance issues
• Reduce employment law risk

Our practical, commercially focused advice helps employers make informed decisions while maintaining fair workplace practices.

This article provides general information only and should not be relied upon as legal advice. Every employment situation is different. Employers should seek professional advice before making decisions that may affect an employee's employment relationship.