The decision to terminate an employee – or a number of employees – can often be the most difficult decision a business owner or manager will ever have to make.
Termination of employment is a delicate process filled with many emotions. In almost every situation, an employee does not welcome the idea of losing their job. Their reaction can be unpredictable, from shock, accepting the decision, and grief, to being verbally or physically abusive.
Therefore, it’s essential business owners and employers understand employee entitlements and employer obligations set out in the Employment Relations Act 2000.
Reasons for Employment Termination
There are many reasons why termination of employment may be necessary. However, in each case it must be justifiable given the facts. This can include:
Serious Misconduct – when an employee’s behaviour is out of line with company policy, is against the terms of an employment agreement, or is unlawful.
Performance Issues – due to factors such as lack of skill, care, diligence, or quality.
Capacity – an employee’s lack of ability to fulfil the requirements of their role.
Redundancy – when a business decides they no longer need an employee’s job to be done by anyone, the employer becomes insolvent, bankrupt, or acquired by another business. BrightHR’s Redundancy Navigator can help you through this process.
If an employee is dismissed and was not in a trial period, they have up to 60 days after they find out about the dismissal to request a written statement of the reasons for dismissal. The written statement must be provided by the employer within 14 days.
If the written statement is not provided, the employee may be able to raise a grievance after the required 90-day limitation period. If dismissal is in relation to a trial period the employer needs to provide an explanation if asked, but this can be verbal under a trial period.
Process Before Termination of Employment
When dismissing an employee, it is essential to follow a clear process. You must:
Act in good faith.
Have a good reason for the dismissing the employee.
Follow a fair and reasonable process.
Be transparent when dealing with issues.
Fair Process
When considering dismissal, an employer must follow all proper and fair processes prior to terminating an employee. This includes reasons for the proposed dismissal and an opportunity for the employee to respond. This is because the reason for the dismissal and the process adopted deciding to dismiss will be considered in determining whether a dismissal was fair or unjustified.
What is considered fair process depends on:
The circumstances surrounding the employee.
Whether you followed relevant provisions in the employment agreement and workplace policies.
This means you are required to follow a process where you:
Investigate the matter relating to the employee.
Raise concerns with the employee in a meeting.
Allow the employee to respond to your concerns.
Genuinely consider the employee’s response.
Employment Termination Notice
Employers should provide employees with written notification that their employment has been terminated.
The amount of notice required for each employee will be outlined in the employment agreement and can only be ignored if an employee is being terminated for serious misconduct. One important consideration for employers is although the dismissal may be justified there is still a formal process which must be followed.
No Notice Period
Best practice is to include a notice period in every employment agreement, or at least have something in writing regarding how much notice you, or an employee if they resign, are required to give. However, if nothing is written anywhere regarding notice, the requirement is for fair and reasonable notice.
To determine exactly what fair and reasonable notice is you should consider how long the employee has been in the role, the job itself, and how long it may take to find a replacement. And without considering the points above, two to four weeks is often agreed as fair notice.
If the employment agreement doesn’t have a notice period, then fair and reasonable notice must be given. This should consider length of service, type of job, how long it might take to replace the employee and common practice in the workplace. Depending on the role, 2 to 4 weeks’ notice is often seen as fair.
Final Pay
Employees should receive their final pay on the pay day for their final period of employment at the latest.
An employee’s final pay must include:
Payment for all the hours worked since the last pay until the end of employment.
Payment for annual holidays, public and alternative holidays owing.
Any additional lump sum or other payments owing. These may be included in the employment agreement or negotiated as part of a leaving package.
Any authorised deductions can be taken from the final pay.
If an employee does not receive all the components of their final pay which are owing, they may have a claim for unpaid wages or holiday pay or other breach of their employment agreement.
Common mistakes to avoid
Dismissing someone for misconduct that isn’t serious enough to warrant dismissal.
Not providing support or training during a performance management process.
Not giving the employee enough time to improve during a performance management process.
Using warnings that are not recent enough to demonstrate an employee’s ongoing misconduct.
Getting the process wrong — even if there's a good reason for dismissal, you need to complete all the steps, in the right order.
Employsure can help you navigate the process of terminating employment. For peace of mind, call our Support Line now on 0800 675 700.
