Deed Of Release For Redundancy In New Zealand: Employer Guide

Redundancies are never fun, especially when you’ve built a small team and you know the changes will land personally.

But if your business genuinely needs to restructure (for example, due to financial pressure, technology changes, or losing a major client), you can usually manage the legal risk by handling the process carefully and documenting the outcome properly.

One of the most common documents used at the end of a redundancy process is a deed of release for redundancy (sometimes also called a “deed of release” or “deed of settlement”). It’s designed to record the final terms of departure and, in many cases, to help both sides move forward with clarity.

In this guide, we’ll walk you through what a deed of release for redundancy is, when it makes sense to use one, what to include, and the practical steps to prepare it as a New Zealand employer.

What Is A Deed Of Release For Redundancy?

A deed of release used in redundancy is a formal written agreement that typically:

• records the agreed exit terms (final pay, notice arrangements, leave, redundancy compensation if any); and
• includes a “release” where the employee agrees not to bring certain claims against the employer (and sometimes vice versa), usually in exchange for something of value (often an agreed additional payment or benefit).

In plain English: it’s a way to finalise the relationship and reduce the risk of disputes after the employee leaves.

Is A Deed Of Release The Same As A Settlement Agreement?

People use different labels, but the idea is similar: you’re recording agreed terms and trying to achieve certainty. In NZ employment matters, settlements are commonly documented as a Deed of Settlement or deed of release.

One key point: there’s a practical difference between a privately signed deed and a settlement that’s reached through MBIE mediation and signed under section 149 of the Employment Relations Act 2000 (a “Record of Settlement”). A section 149 settlement generally has stronger protection against later challenges, because it’s signed in the prescribed way and the mediator must be satisfied the settlement was entered into freely and knowingly. If you’re trying to get maximum certainty, it’s worth getting advice on whether MBIE mediation (and a section 149 settlement) is the better pathway for your situation.

Why Employers Use A Deed Of Release In A Redundancy

From a small business perspective, a deed of release can be helpful because it:

• reduces uncertainty about whether the employee may raise a personal grievance later;
• documents the “full and final” deal (so there’s less room for misunderstandings);
• sets clear expectations around confidentiality, property return, and handover; and
• can be a practical way to offer an enhanced package to support a smooth transition.

That said, a deed of release is not a “magic shield”. If the redundancy process itself is not handled properly, you can still face risk.

When Should You Consider A Deed Of Release?

You don’t always need a deed of release in every redundancy. But it can be particularly useful when you’re trying to close out risk, especially if there’s any chance the employee may be unhappy with the process or outcome.

As a practical guide, consider using a deed of release at the end of a redundancy when:

• you’re offering an extra ex gratia payment (above minimum entitlements) to support the employee’s transition;
• you want to agree on specific notice arrangements, including payment in lieu of notice;
• there’s a dispute brewing about the selection process, consultation, or redeployment options;
• you want to document an agreed reference, statement of service, or communication plan to the rest of the team/clients;
• the employee has access to sensitive information and you need stronger confidentiality obligations (noting you can’t stop a person from doing lawful things, but you can tighten contractual protections appropriately); or
• you want a clean, agreed end-date because your business needs certainty for rostering, client delivery, or cashflow planning.

When A Deed Of Release Might Not Be The Right Fit

Sometimes a deed of release doesn’t match the situation, for example:

• the redundancy is very straightforward and the employee is content with contractual notice and final pay; or
• you’re still in the middle of consultation and haven’t made a decision yet (pushing a “release” too early can look like you’ve pre-determined the outcome).

If you’re unsure, getting tailored redundancy advice early usually saves time and cost later.

Get The Redundancy Process Right First (Before You Draft Anything)

A deed of release is usually the last step. The first step is making sure the redundancy itself is lawful and fair.

In New Zealand, redundancies are primarily governed by good faith obligations under the Employment Relations Act 2000. Even if your business is under real pressure, you’re generally expected to run a fair process.

1. Check You Have A Genuine Business Reason

Redundancy should be based on a genuine business reason (for example, restructuring, role disestablishment, downturn, cost-saving, or operational change), not because an employee is underperforming or there’s a personality clash.

If the real issue is performance or conduct, you usually need a different pathway and different paperwork (this is where an employee termination documents approach may be relevant, depending on the circumstances).

2. Follow A Fair Consultation Process

Consultation isn’t a “tick the box” email. Good faith generally means you should:

• explain what changes you’re proposing and why;
• share relevant information that helps the employee understand the proposal (while being careful about genuinely confidential info);
• give the employee a real opportunity to comment; and
• genuinely consider their feedback before making a final decision.

This is often where redundancy processes fall over for small businesses, not because the business reason isn’t real, but because the consultation was rushed or poorly documented.

3. Consider Redeployment And Alternatives

Before confirming redundancy, you should usually consider whether there are reasonable alternatives, such as:

• redeployment into another available role (even if it’s different);
• retraining (where feasible);
• reducing hours by agreement;
• job-sharing; or
• other cost-saving options.

What’s “reasonable” depends on your business size and resources, but it’s important to show you turned your mind to alternatives.

4. Check The Employment Agreement For Notice And Redundancy Terms

Your starting point is always the employee’s Employment Contract. Redundancy compensation is not automatically required by law in every case, but it may be included in the agreement or your policies, and you’ll still need to pay all minimum entitlements.

Also consider obligations under the Holidays Act 2003 (for annual leave) and the Wages Protection Act 1983 (for deductions and payment rules), because “final pay” disputes are a common flashpoint.

What Should A Redundancy Deed Of Release Include?

There’s no one-size-fits-all deed of release template that suits every business. The document should match your process and the terms you’ve actually agreed.

That said, most well-drafted deeds of release for redundancy will cover the following.

1. Parties, Background, And Effective Date

This section typically identifies:

• the employer and employee;
• the employee’s role; and
• that the employment will end due to redundancy, with an agreed final day.

It’s common to include a short background (“recitals”) summarising that consultation occurred and the parties want to resolve matters on agreed terms.

2. Termination Arrangements (Notice, Garden Leave, Or PILON)

Be clear about how notice is being handled:

• Will the employee work their notice?
• Will you place them on garden leave (if allowed by their agreement and handled properly)?
• Will you provide payment in lieu?

If you do use payment in lieu, it needs to be clearly documented (and aligned with the agreement and payroll treatment). This is often referenced in payment in lieu of notice discussions because small drafting differences can have big practical consequences.

3. Final Pay, Leave, And Any Redundancy Compensation

Your deed should set out exactly what will be paid, including:

• salary/wages up to the termination date;
• annual leave entitlement to be paid out;
• any alternative holidays, if applicable;
• commission/bonus treatment (if relevant);
• reimbursement of expenses; and
• any redundancy compensation or ex gratia amount (and when it will be paid).

Be careful with vague wording like “all entitlements will be paid” without a method or timing. Clear drafting reduces the risk of later disagreement.

4. The Release (What Claims Are Being Settled)

This is the core of the deed.

Typically, the employee agrees to release the employer (and related parties like directors, shareholders, employees, and agents) from claims arising out of the employment or its termination. Often this includes personal grievance claims (such as unjustified dismissal), but the wording needs to be carefully drafted so it’s enforceable and appropriate.

It’s also common for the employer to provide a limited release back to the employee (for example, confirming you won’t pursue claims relating to the employment, except for certain carve-outs like fraud or wilful misconduct if relevant).

Important: there are legal and practical limits on what you can “release”, and a privately signed deed may still be challenged in some circumstances (for example, if there are allegations of duress, misrepresentation, or serious process flaws). In some situations, it may be safer to document the outcome as a mediated settlement through MBIE under section 149 of the Employment Relations Act 2000.

5. Confidentiality And Non-Disparagement

Most deeds include confidentiality clauses covering:

• the terms of the deed (including the payment);
• business information; and
• client or supplier information.

If you include non-disparagement (an agreement not to make negative statements about each other), keep it realistic and mutual where appropriate. Overly aggressive clauses can inflame the situation or be difficult to enforce.

6. Return Of Property And Handover

This is a practical section that protects your business day-to-day. It should cover items like:

• laptops, phones, keys, uniforms, tools;
• return of documents and records;
• access to software accounts, passwords, MFA devices;
• handover notes and transition support; and
• confirming deletion/return of business data (where appropriate).

If your employee has handled personal information, remember your ongoing obligations under the Privacy Act 2020 around safeguarding and controlling access to information.

7. Reference, Announcement To Staff/Clients, And Statement Of Service

To avoid “he said / she said” later, many businesses agree on:

• a neutral statement of service (role, dates, duties);
• an agreed written reference (or agreed wording if you give verbal references); and
• who will say what to customers, suppliers, and the team (and when).

This is often worth doing, especially for customer-facing roles, because it reduces reputational risk and helps your business stay stable during change.

8. Independent Advice And Time To Consider

It’s common (and sensible) to include clauses confirming the employee:

• has had the opportunity to seek independent legal advice;
• has had time to consider the deed; and
• is signing voluntarily.

From a risk-management perspective, rushing someone to sign a release is rarely worth it. If you’re offering an enhanced payment, consider building in a reasonable signing period.

How To Prepare And Sign The Deed (A Step-By-Step Checklist)

Once your redundancy process is substantively complete (or you’ve reached an “in principle” agreement after consultation), you can move toward documenting the outcome.

Step 1: Confirm The “Non-Negotiables” Internally

Before sending anything to the employee, clarify:

• your business reason for redundancy and key dates;
• the final day of work vs termination date (if different);
• what you’re willing to offer as an ex gratia payment (if any);
• what you need returned and when; and
• what you want to say to the team/clients.

If you’re dealing with multiple employees, consistency matters. If you treat people materially differently without a clear reason, it can increase the risk of complaints.

Step 2: Align The Deed With The Employment Agreement And Your Policies

Your deed should not accidentally contradict the employment agreement. For example, notice periods, restraint clauses, confidentiality, and IP provisions should be checked for consistency.

This is a good time to ensure your broader employment documentation is in good shape, especially if you’re about to restructure and rehire into new roles. If you’re updating agreements or rolling out new terms, it may be worth packaging that work alongside your redundancy paperwork (a redundancy document suite approach can help keep everything consistent).

Step 3: Draft The Deed With Clear Payment Mechanics

Ambiguity causes disputes. Your deed should clearly state:

• gross vs net payment amounts;
• timing of payment (for example, within X days of signing);
• how final pay will be processed; and
• any deductions (only if lawful and properly authorised).

Tax treatment can be tricky depending on what is being paid (ordinary wages, holiday pay, ex gratia amounts). Your payroll provider or accountant may need to confirm treatment. This article is general information only and isn’t tax advice-if you’re unsure, check with your accountant and/or Inland Revenue (IRD).

Step 4: Offer The Employee Time (And Encourage Independent Advice)

Even where the process has been fair, redundancy is emotional. Giving the employee time to review the deed helps reduce the risk they later argue they felt pressured.

If they do get legal advice, be prepared for some negotiation. Often it’s minor (for example, clarifying the reference wording, timing of payments, or confidentiality carve-outs).

Step 5: Execute The Deed Properly

Deeds have signing requirements and should be executed correctly. While NZ practice varies depending on the deed format and the parties (individual vs company), you should ensure:

• the right legal entity signs (check your company name and NZBN details if relevant);
• the right signatory signs (director/authorised signatory);
• witnessing is handled appropriately if required; and
• each party receives a copy of the final signed deed.

If you’re unsure about execution formalities, it’s worth getting legal help so you’re not relying on a document that’s incorrectly signed.

Step 6: Follow Through On Handover, Property Return, And Internal Communications

Finally, make sure the operational pieces are done:

• disable access to systems on the right date;
• collect devices and keys;
• send agreed staff/customer comms; and
• keep a secure record of the deed and redundancy documentation (consultation notes, letters, selection criteria if relevant).

And if you’re restructuring more broadly, it can be a good time to sanity-check your approach against best practice. Articles like redundancy and voluntary vs forced redundancy can help you spot common issues before they turn into expensive disputes.

Key Takeaways

• A deed of release for redundancy helps document final exit terms and can reduce the risk of claims after a redundancy, but it won’t fix a flawed redundancy process.
• Before drafting a deed, make sure you have a genuine business reason for the restructure and you’ve run a fair, good-faith consultation process under the Employment Relations Act 2000.
• A well-drafted deed will usually cover termination dates, notice or payment in lieu, final pay and leave, any redundancy/ex gratia payment, release wording, confidentiality, property return, and agreed communications.
• Be especially careful with payment drafting (amounts, timing, and payroll treatment), because final pay disputes are one of the most common problems after termination.
• Give the employee time to consider the deed and the opportunity to get independent advice, as this can reduce the risk of later challenges.
• Execution formalities matter-if a deed is not signed correctly, it may not give you the protection you think it does.

If you’d like help preparing a deed of release for redundancy, or managing a redundancy process from start to finish, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.