The company taking over Auckland Central Remand Prison at Mt Eden will be fined $150,000 if a prisoner dies of unnatural causes.
The penalty is contained in the Government's $300 million contract with multinational Serco. The contract was tabled in Parliament on Wednesday.
The $150,000 fine also applies whenever a prisoner escapes.
The company will lose $100,000 each time it breaks the law.
The contract also includes a number of performance criteria which will be rewarded, including the number of prisoners in rehabilitation programmes.
There is no mention of minimum staffing levels.
The prison officer's union, the Corrections Association, says the contract confirms many of its worst fears.
Mr Hanlon says the union's concerns that the company intends to shed staff and reduce wages are coming true.