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Ending Employment

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11 min read

Getting started Quick answers How do I calculate final pay and when do I have to pay this? How do I terminate a casual contract? What final payments do I need to make to someone who has abandoned employment? My employee has left without giving notice, can I deduct the notice period from the final pay? Can I terminate my employee for providing false information at recruitment? Good practice when restructuring Three stages of restructuring your business Can you reduce the number of contracted hours the employee works?

Employment can end in lots of ways and ideally, an employer and employee will part company amicably and professionally. When managing the ending of employment it is essential to remember to act in good faith and follow a fair process at all times when, continuing to follow the right processes and carry out exit interviews. This page will provide you guidance on best practice when ending employment,  as it’s important as an employer to mediate and actively manage these processes, as sometimes difficulties and issues can arise. You need to tie up all the loose ends of the employment relationship and also ensure that employees receive what they are legally entitled to. If an employee resigns or leaves as a result of disciplinary action, or if a position is disestablished in a restructure, managing the relationship can be very important and in some cases, and specific processes must be followed. This page will outline a three-step process, that will provide you resources for mediation and employment advice. 

Getting started

  • Think about what you need to sort out as soon as you know an employee will be leaving.
  • Agree with your employee the date they will stop working on your farm.
  • Ensure employees receive the correct entitlements in their final pay, including any annual leave owing.
  • Follow a fair process during disciplinary and redundancy situations.
  • Carry out exit interviews with departing staff. Discuss your strengths and weaknesses as an employer, you may get some great insights that will help keep future employees.

Remember to...

  • Discuss with employee what monies they will receive when they leave and why.
  • Review your employment agreement to ensure you understand the terms and conditions you are operating under. This will confirm the notice period required under different situations, what your employee is entitled to, and also let you know what, if any, deductions you can make for outstanding monies or work not completed.
  • Stay on good terms whenever possible at the end of the employment relationship. Remember your reputation is critical to attracting great people.

People publications

The following publications are available for order or download from DairyNZ.

Quick answers

How do I calculate final pay and when do I have to pay this?

In general, the final pay should include:

  • The employee’s normal wages, or salary, for any time worked since the last pay day.
  • Any outstanding holiday pay.
  • Payment for any alternative holidays.
  • And in some cases, payment for upcoming public holidays.

The final pay should be paid no later than the next regular pay day. If you wish, you can pay the final pay earlier than this, for example, on the employee’s last day.

Read full details on how to calculate entitlements on termination or resignation.

Deductions: as a general rule, an employer cannot make deductions from an employee’s wages unless the employee has requested, or agreed to it, in writing. You may be able to deduct certain items from an employee’s final pay if the deduction is provided for in the employment agreement, and it is fair and reasonable to make the deduction, given the circumstances.

Before making any deduction, review this guide to wage deductions. Remember that the deduction needs to be fair and reasonable.

How do I terminate a casual contract?

The first thing you should do is determine whether the employee is in fact a casual employee. A genuine casual employee works from time to time, as and when required. A typical example may be a retired employee who fills in when other employees are away on leave.

If an employee works regular hours for an extended period of time, they are not a genuine casual employee - regardless of what the employment agreement says. They are a permanent employee.

If the employee is a genuine casual employee, then follow the termination clause outlined in the employment agreement, including any relevant notice period. Typically this involves notifying the employee that there is no more work available in the foreseeable future and as a result you will be terminating their contract. If applicable, pay out any remaining leave entitlements as part of their final pay. True casuals are often paid their holiday pay on a “pay as you go” basis, so there is generally no holiday pay owed.

Read full details on how to calculate entitlements on termination or resignation. True casuals are often paid holiday pay on a "pay as you go" basis. Remember, there are strict rules around who is eligible for pay-as-you-go holiday pay and how this arrangement is documented.

If the employee is not genuinely a casual, then the situation is much more complex. If you terminate the contract, then it is likely that the dismissal will be found to be unjustified.

You should look at the specific circumstances of the case. Why do you wish to dismiss the employee? If the position is no longer required, then this is potentially a redundancy situation and needs to be managed as such.

Find out more about managing redundancy situations.

If the matter is performance or misconduct related, you need to address this via a disciplinary process.

Address poor performance early through a performance management process. For serious matters, seek legal advice and read further on disciplinary procedures and investigating misconduct. Keep in mind that you are required to act in good faith and follow a fair process.

What final payments do I need to make to someone who has abandoned employment?

An employee who has abandoned their job is entitled to the same payments they would have received had they resigned normally and given notice. These will generally include:

  • The employee’s normal wages or salary for any time worked since the last pay day.
  • Any outstanding holiday pay.
  • Payment for any alternative holidays owing.
  • And in some cases, payment for upcoming public holidays.

Read full details on how to calculate entitlements on termination or resignation including some practical examples.

You may be able to make a deduction for lack of notice if the employee has provided written consent for this, for instance, as part of their employment agreement. The amount deducted must be equivalent to the amount of notice period not worked. As an example, if the employee’s notice period is 2 weeks, you can deduct 2 weeks wages from their final pay. The deduction also needs to be fair and reasonable given the circumstances.

Review what wage deductions you are able to make and ensure a fair and reasonable process is followed.

If the employment agreement does not contain a clause covering this situation, you cannot make a deduction for this. You must pay out their full final pay. Depending on the situation you can then:

  1. Lodge a claim with the Employment Relations Authority for breach of contract.
  2. Decide it’s not worth it and improve things for next time by adding a deduction clause to your employment agreement template.

Read the process for lodging a claim with the Employment Relations Authority. Also learn more about employment agreements and where to get help.

Remember that you must conduct a full and fair investigation before determining that an employee has abandoned their employment. You cannot automatically dismiss an employee after an unauthorised absence. You must make reasonable efforts to contact the employee and determine why they are absent. Listen with an open mind. Carefully consider their explanation and any other relevant information (e.g. medical certificates or conversations with family members) before deciding whether the employee has in fact abandoned employment.

My employee has left without giving notice, can I deduct the notice period from the final pay?

You can deduct the notice period if the employee has agreed to the deduction in writing. A signed employment agreement providing for this type of deduction can be taken as an agreement in writing.

Before making any deduction, read this guide to wage deductions.

The amount of the deduction must be equivalent to the amount of the notice period not worked. For example, if the employee’s notice period is 2 weeks and they didn’t work at all, you can deduct 2 weeks wages from their final pay. If the employee’s notice period is one month and they worked 3 weeks of this, you can deduct one week wages from their final pay.

The clause needs to specifically mention that wages will be deducted in-lieu of notice – you cannot rely on a general catch-all clause. The deduction also needs to be fair and reasonable given the circumstances. It may not be appropriate to apply the deductions clause to an employee who doesn’t give the required notice because of reasons genuinely outside their control (e.g. a terminally ill relative or other extraordinary situation).

If the employment agreement does not contain a deduction clause, you cannot make the deduction. Depending on the situation you can:

Lodge a claim with the Employment Relations Authority for breach of contract.

Decide it’s not worth pursuing and improve things for next time by adding a deductions clause to your employment agreement template.

Find out the process for lodging a claim with the Employment Relations Authority. Also, learn more about employment agreements and where to get help.

Can I terminate my employee for providing false information at recruitment?

Firstly, you need to determine whether the employee actually provided false information during the recruitment process, or whether they were just silent on the matter in question.

A typical example might be criminal history. Suppose you find out an employee has a serious criminal conviction. If you directly asked an employee whether they had any criminal convictions or pending charges in an interview or application form and they said no, they have provided false information. If you did not ask this question and the employee did not volunteer this information, then they have not provided false information. An employee is not obliged to volunteer information that may adversely affect their job prospects. Also, remember that under the Clean Slate Act, an employee may legitimately answer no to this question in certain situations e.g. minor convictions that occurred over 7 years ago.

Providing false information can be a misconduct or serious misconduct offence. You must follow your normal problem-solving procedure in this situation. This includes communicating openly and honestly with the employee, conducting a full and fair investigation and genuinely listening to the employee’s explanation.

Note that if the employee merely exaggerated their skills and experience, there may be little you can do. The false information needs to be of a material nature, such that it influenced your decision to hire the employee.

If you do decide to take disciplinary action (e.g. a warning, or in rare cases, dismissal), it must be justifiable. In general, dismissal is only a possibility if 1) the false information was of a significant nature, 2) the employee deliberately misled you and 3) this incident has deeply undermined your trust and confidence in them. Please seek legal advice before taking any action.

Learn more about disciplinary procedures and investigating misconduct Remember as well you are required to act in good faith and follow a fair process at all times.

Very serious matters may also be referred to the police. CV fraud, for instance, can incur a charge of using a document for pecuniary advantage.

Prevention is always better than cure, so ensure your recruitment procedures are robust and carry out reference checks to avoid this situation occurring.

To read more about reference checking, head to the recruitment and selection pages.

Key documents

Good practice when restructuring

Many farm businesses are looking for ways to get through difficult times while maintaining employees' jobs.

There are three suggested stages of introducing a restructuring plan based on establishing and maintaining good faith relationships. This means treating others in the way you would like to be treated - honestly, openly and with mutual respect.

Remember you are required to observe any restructuring clauses contained in the applicable employment agreement.

Three stages of restructuring your business

Stage One - Consultation

  • Convey restructuring intentions as a proposal rather than as a pre-determined decision.
  • Provide all staff with an opportunity to express their opinions and views on the idea.
  • Ensure staff feel they contribute to a combined solution to the current problems affecting your business. In some instances they may come up with creative solutions. A good consultation process should bring these out.
  • Give staff time to absorb your proposals and invite further feedback after a set period of time.
  • Based on the feedback, make a definite decision about what you are going to do and what positions are sustainable and which ones are not. At this stage refer to affected positions not individual staff members.
  • Clearly communicate your decisions to all relevant staff members and outline quite explicitly what will happen next. Staff need to have clear information on what will happen.

Stage Two - Implementation

Restructuring can be undertaken in three defined ways.

Some staff can be reconfirmed in the same or similar positions to their existing ones within the business. Others with suitably transferable skills can be offered re-assignment to another available position within the business. Positions that are considered unsustainable are those where redundancy is likely.

  • Be upfront and honest about why there is a need to make changes. Staff are more likely to be understanding if information is clearly made known to them.
  • Discuss with each affected staff member your plans to reconfirm, reassign or make their position redundant. Listen to their views and provide them with time to consider your decision. Ensure that you obtain written confirmation from staff who accept your offer to retain them within the restructured business.
  • Once staff have been confirmed in their restructured positions it is important that your presented plan should no longer be open to negotiation. Be decisive. Indecision gives rise to confusion and internal division amongst staff in the hope of influencing or changing decisions.

Stage Three - Resolution

  • Every effort should be made to address and resolve issues and problems that may exist with affected staff.
  • Ensure that reconfirmed and re-assigned staff feel reassured and well-resourced to adequately undertake their new duties. It is important to instil a sense of new opportunity and renewal amongst restructured staff.
  • Conduct a consultation session with each employee being made redundant to explain the terms of their employment agreement and what you are prepared to do for them. Ensure that each affected employee has the opportunity for a support person at this meeting should they desire this. Provide them with the opportunity to air their concerns and discuss what you can and cannot do to address these. Specifically record and document these sessions with an independent note-taker.
  • Invite affected staff to converse with you further about any problems that they are experiencing. They should see you as a source of support.
  • Try to make provision for the future job prospects of those employees in soon-to-be redundant positions. During their notice period consider granting them time off to attend job interviews. Make specific and clearly defined boundaries for these provisions.
  • Where a staff member expresses a grievance with the process followed it is important to discuss this with them and attempt to satisfactorily resolve the issue between yourselves. Again, ensure that the employee has a support person present at such a meeting if required.
  • In this meeting create an open, honest, respectful and supportive environment. Look for common ground and acceptable variations. Encourage collaboration towards a solution. Don't give advice, judge, discount, sympathise, invade or takeover the other person’s viewpoint. Be clear about what you can and cannot do and define and record any mutually agreed outcome.
  • Should there still be no way to satisfactorily resolve a grievance then you and the employees can together or separately ask for free mediation to help settle the differences by phoning 0800 20 90 20.

Can you reduce the number of contracted hours the employee works?

You can propose a reduction in hours of work as an alternative to redundancy. You must follow a fair process and give the employee an opportunity to consider and respond to the proposed change. Any change in hours of work must be made by agreement between the employee and the employer.

If the employment agreement outlines what the hours of work are, you cannot change them without consulting with the employee first and getting their agreement.

Some employment agreements may contain a clause allowing the employer to change an employee's hours of work. However, you must still act fairly and reasonably by communicating as much as possible about how the changes will affect the employee. Allow the employee an opportunity to seek independent advice and respond to any issues raised by the employee.

The employee can negotiate with the employer to try and explore arrangements or alternatives that would be beneficial for both parties.

If the change to the hours of work disadvantages the employee, or the employee feels the procedure followed was unfair, you should try to resolve the issue with the employee in the first instance.

If you are not successful, you can together or separately ask for free mediation to help settle the differences by phoning 0800 20 90 20.

The Employment New Zealand website offers additional detailed advice on employment matters. Visit the website here.

Last updated: Sep 2023
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