Key legal essentials to protect your business and avoid costly disputes.
Imagine this — you hire a new employee for your small business. Things go well at first, but after a few months you realise they’re not the right fit. You decide to terminate their contract, assuming a simple conversation will do the trick.
A few weeks later, a letter arrives from a lawyer: your former employee is taking legal action for unfair dismissal. Suddenly, you’re facing legal fees, reputational damage, and the stress of a formal dispute — all because the correct process wasn’t followed.
For New Zealand SME owners, employment law can feel overwhelming. Unlike larger companies with in-house HR and legal teams, small businesses often don’t have the time or expertise to stay on top of every regulation. Yet even unintentional mistakes can lead to expensive and time-consuming disputes.
From recruitment and agreements to performance management and termination, understanding the basics of employment law is essential to protecting both your business and your people.
The solution – know the basics, protect your business
Employment law in New Zealand is designed to ensure fair treatment for both employers and employees. While it can seem complex, following a few key principles will keep your business compliant — and out of legal trouble.
Here’s what every SME needs to know:
1. Employment agreements are essential
Every employee in New Zealand — whether full-time, part-time, or casual — must have a written employment agreement. This is a legal requirement under the Employment Relations Act 2000.
A well-drafted agreement should include:
Job title, duties, and responsibilities – Clearly define the role.
Work hours and pay – Specify hours, wages, and overtime conditions.
Trial or probationary periods – Must be clearly stated and compliant.
Leave entitlements – Include annual, sick, and public holiday entitlements.
Termination conditions – Notice periods and grounds for dismissal.
Having clear, legally sound documentation prevents misunderstandings and disputes. Our HR specialists can draft or review your agreements to ensure full compliance with NZ employment law.
2. Know your employees’ rights
New Zealand has strong employee protections that all businesses must follow. Key rights include:
Minimum wage – Reviewed annually and must be paid at all times.
Rest and meal breaks – Required based on work hours.
Annual leave – Minimum of four weeks’ paid leave per year.
Sick leave – Ten days of paid sick leave per year for eligible staff.
Public holidays – Paid days off or time-and-a-half pay if worked.
Failure to provide these entitlements can result in penalties from the Employment Relations Authority (ERA). The Payroll team at Pivotal People ensures your wage, leave, and entitlement calculations meet all legislative requirements.
3. Handle performance issues and dismissals legally
Managing performance is part of running any business, but termination must be handled lawfully. Common SME mistakes include:
Dismissing an employee without a valid, documented reason
Failing to issue written warnings
Not following a fair and transparent disciplinary process
Best practices include:
Document everything – Keep written records of meetings, warnings, and performance discussions.
Follow due process – Give employees a chance to respond and improve.
Consider mediation – Early mediation often resolves issues before escalation.
If dismissal becomes necessary, our HR advisors can guide you through a fair and compliant process, reducing the risk of personal grievance claims.
4. Stay informed about law changes
Employment legislation evolves frequently, and staying up-to-date protects your business from accidental breaches. Recent NZ changes include:
Fair Pay Agreements Act – Sets minimum terms across certain industries.
Increased sick leave entitlements – From five to ten days annually.
Stronger dismissal protections – Especially for vulnerable workers.
Through ongoing Business Advisory support, Pivotal People can help you anticipate legislative updates and plan accordingly — keeping your operations compliant and future-ready.
Reflective scenario – what would you do?
You have an employee who’s been consistently late and missing deadlines. Frustrated, you terminate their employment on the spot — only to receive an unfair dismissal claim a few weeks later.
If you had followed best practice, you would have:
Issued a written warning and offered the opportunity to improve
Documented all performance discussions
Considered mediation before taking further action
Employment law isn’t just about avoiding legal trouble — it’s about maintaining fairness, professionalism, and trust within your workplace.
Golden nugget
“Employment law isn’t about making business harder — it’s about creating workplaces where both employers and employees can thrive.”
Taking time to understand and apply employment law safeguards your business, strengthens relationships, and builds your reputation as a fair and responsible employer.
If you’d like support with compliant employment agreements, performance processes, or dismissals, contact our HR team or Business Advisory specialists today.
