How do you terminate an employee in New Zealand in 2026?

Unlike most countries, New Zealand has no notice schedule that scales with tenure. The Employment Relations Act 2000 leaves notice to the employment agreement between the parties. The figure you negotiate is the figure that applies.

Because the law gives no fallback number, a silent contract becomes a dispute waiting to happen. The safest move is to name the notice period in writing for every hire. Senior roles in New Zealand practice often carry one to three months.

Paying notice out

You can pay the notice period out instead of working it, if the employment agreement allows it. The payment covers what the employee would have earned across the notice window. It is taxed as normal income under the PAYE rules run by Inland Revenue.

New Zealand judges a dismissal on justification under the Employment Relations Act 2000. The test is whether a fair and reasonable employer could have dismissed in the same way, looking at both the reason and the steps taken. Process failures sink otherwise sound dismissals all the time.

Common fair reasons to dismiss

1. Serious misconduct, such as theft, violence, or a serious breach of trust, which can justify dismissal without notice after a fair investigation
2. Misconduct, handled through warnings and a chance to improve
3. Poor performance, after clear standards, support, and time to meet them
4. Medical incapacity, where the employee cannot do the job for the foreseeable future
5. Redundancy, where the role is genuinely no longer needed and the process is fair

You cannot dismiss for an unfair reason. Dismissing someone for pregnancy, union activity, raising a health and safety concern, race, or making a protected disclosure is unlawful and gives an automatic grievance, whatever the trial-period or income position.

The personal grievance window

An employee normally has 90 days from the dismissal to raise a personal grievance with the employer. If it is not resolved, it can go to mediation and then the Employment Relations Authority. Remedies include reinstatement, lost wages, and compensation for hurt and humiliation.

The 2026 high-income change

From 21 February 2026, an employee paid NZ$ 200,000/year or more cannot raise a personal grievance for dismissal, with limited exceptions such as discrimination. This came in under the Employment Relations Amendment Act 2026, with a 12-month transition for existing agreements. Check the salary line before you treat anyone as outside the protection.

1. Confirm a fair reason

   Anchor the dismissal to a genuine reason: serious misconduct, misconduct, poor performance, medical incapacity, or redundancy. A reason that would not convince a fair employer will not survive a grievance.

2. Check the high-income line

   Look at the salary first. Staff at or above the high-income threshold lost grievance cover for dismissal from 21 February 2026, but a 12-month transition applies to existing agreements.

3. Run a fair process

   Put the concern to the employee in writing. Give them the information, a real chance to respond, and the right to a support person before any decision.

4. Give the agreed notice

   Serve the notice the employment agreement sets, or fair and reasonable notice if it is silent. You can pay it out where the agreement allows.

5. Settle the final pay

   Pay all wages to the last day plus the full accrued annual holiday balance. Add any redundancy amount the agreement promises and the KiwiSaver contribution.

New Zealand is unusual here. There is no legal redundancy or severance entitlement. As guidance on the Employment Relations Act 2000 puts it, whether an employee is owed compensation depends on what is in their employment agreement. No clause, no payment.

What you actually owe on a redundancy

The law grants 4 weeks of paid annual holidays a year after twelve months. Any holiday balance owing is cashed up on the final pay, on top of any contractual redundancy amount.

So the money risk in a New Zealand redundancy is rarely the payout. It is the process. A redundancy that is really a disguised dismissal, or one run without real consultation, becomes an unjustified dismissal grievance. Write any redundancy compensation into the agreement up front, then run the consultation properly.

Trial periods and redundancy

A valid 90-day trial period lets a first-time hire be dismissed without a personal grievance for that dismissal, if the clause is set up correctly. The trial cannot run longer than 90 days and only applies to someone who has not worked for you before. It does not remove the duty to act in good faith.

Where a collective agreement is in place, it can set its own redundancy terms, including notice, selection, and any compensation. Those terms bind you on top of the good-faith duty. Check the collective agreement before you plan any group exit.

Without fixed windows, the standard is genuine consultation. The Employment Relations Authority looks at whether the process was real or a formality. Skip consultation, or present a decision as already made, and the whole group of dismissals can be ruled unjustified.

What genuine consultation covers

• The business reason for the proposed redundancies
• The roles and number of people affected
• The selection method, where some roles survive
• Any alternatives, such as redeployment or reduced hours
• A real chance for employees to give feedback before the decision

A record of settlement is the New Zealand route to a mutual exit. The parties agree the terms, then a mediator from Employment New Zealand signs the agreement. Once signed off, it is binding and cannot be undone, which gives both sides certainty.

Typical terms in a New Zealand record of settlement:

• Final pay, covering wages to the last day plus all accrued annual holidays
• Notice or payment for notice, set by the agreement
• An agreed exit sum, where the parties want one above anything the contract promises
• A waiver of personal grievances, so the matter is closed once and for all
• Confidentiality and an agreed reference, where both sides want them

On the final pay timing, New Zealand sets no fixed number of days after the end date by which everything must be paid. Final pay, including the holiday balance, is normally paid in the pay run that covers the employee's last day. Teamed processes it in the next scheduled pay run after the last working day. Get the record of settlement signed before the last day to avoid arguments about timing.

Real HR and legal experts handle your New Zealand hires, from the first employment agreement through every pay run and statutory deduction. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee, and employer cost passes through at cost, itemised on every invoice.

The split of responsibilities under EOR for New Zealand terminations:

New Zealand has no statutory severance and no fixed consultation window. The real exposure is a process that an authority later calls unjustified. Teamed runs the process to the good-faith standard on every exit, and keeps the paper trail.

EOR, contractors, and entity employees all live on one platform. An employee hired through Teamed's New Zealand network can graduate to your own New Zealand entity when headcount makes that the right call, until it isn't. Run the Crossover Calculator to see when the model flips. For a higher-protection contrast, compare termination in Germany, where dismissals need works-council steps New Zealand has no equal to. Start from the New Zealand hiring overview.

Key sources: Employment New Zealand, Employment Relations Act 2000, Employment Relations Amendment Act 2026, and Inland Revenue KiwiSaver guidance.