Proposed changes to New Zealand Employment Law

It has been a big year for New Zealand employment law in 2025. The proposed amendments seem to have many benefits for employers and may provide a sense of relief to our clients. We summarise the proposed amendments below along with providing insights into what these proposed amendments mean to employers.

Income threshold for unjustified dismissal claims

The income threshold for raising a personal grievance for unjustified dismissal is proposed to be capped at $180,000 per annum. The proposal states that the $180,000 threshold applies to regular base salary and excludes other employment incentives and benefits.

Although the proposal intends to remove the rights of employees who earn above $180,000 per annum from raising a personal grievance relating to unjustified dismissal claims, it is important to note that employees still retain their rights in being able to raise a personal grievance pertaining to unjustified disadvantage.

What this means for employers if the proposed amendment goes ahead?

This proposed change will allow employers to dismiss employees in high value positions, without having to risk a costly and lengthy dismissal process if things don’t work out. This proposed change could save employers a significant amount of legal costs in defending dismissal claims. The proposed change could also save employers from having to make hefty settlements relating to unjustified dismissal claims.

Reductions in personal grievance payouts

A reduction in the cost for remedies rewarded to employees in relation to personal grievance claims is currently being proposed.

The proposal states that if employees are found to have contributed to the breakdown in the employment relationship or if they engaged in serious misconduct, they would not have rights to reinstatement or compensation for hurt and humiliation. This is because it would be seen that the employee’s behaviour contributed to the issue.

What this means for employers if the proposed amendment goes ahead?

This proposed change would allow employers to terminate employees who would have engaged in serious misconduct or would have contributed to the breakdown in the employment relationship with more confidence. It would mean that employers would not have to worry about the potential of employees being rewarded hefty pay outs or reinstatement if they had been at fault in the breakdown of the employment relationship.

Contractor Gateway Test

The government is also proposing changes to the employee and contractor classification requirements.

This proposed amendment will simplify how the difference between an employee and contractor is determined. The proposed amendment will add a ‘gateway test’ with the following four criteria that will need to be met in order to determine if the staff is classified as a contractor:

• A written agreement with the worker, specifying they are an independent contractor

• The business does not restrict the worker from working for another business (including competitors)

• The business does not require the worker to be available to work on specific times of day or days, or for a minimum number of hours OR the worker can sub-contract the work

• The business does not terminate the contract if the worker does not accept an additional task or engagement.

What this means for employers if the proposed amendment goes ahead?

The change aims to ensure businesses and workers have more clarity from the start of their contracting arrangement as to whether a worker is an employee or a contractor. This approach aims to reduce employment disputes over classifications and entitlements.

Removal of 30 day rule relating to collective agreements

The government is proposing to make amendments to the 30-day rule relating to employees being on collective agreement terms during their first 30 days of employment.

The current law states that a new employee’s individual employment agreement must reflect the terms of the collective agreement for their first 30 days of employment (if there is a collective agreement in force).

The proposed amendment would mean that this rule no longer applies. Employees can still opt to be part of the collective agreement however they are not automatically on the collective agreement during their first 30 days of employment.

The proposed amendment also proposes to remove the requirement of employers having to provide the 'active choice form’ to new employees. This form allows employees to indicate if they opt to be part of the collective agreement that would be in force.

Employers would still need to communicate that the employee may join a union that is a party to the collective employment agreement, how to contact the union and that if the employee joins the union, the employee will be covered by the terms of the collective agreement.

What this means for employers if the proposed amendment goes ahead?

Currently, if employees are moving from a collective agreement (that does not include a Trial Period) to an individual employment agreement after their first 30 days, then employers are not able to have employees on a Trial Period as the employees would no longer be considered new employees.

If the proposed amendments go ahead, it will mean that employers could have employees on a 90-day Trial Period from their first day of employment if employees opted to be on an individual employment agreement from day one. It would also mean that employers and employees can negotiate their own terms of employment from day one rather than relying on collective agreement terms already in place. 

The proposed amendments would allow employers to have more flexibility during an employee’s initial onboarding stage. It would remove administrative costs and excessive pressure in having to provide union related information to new employees during the initial onboarding stage.

If you required further information or advice regarding these proposed changes, contact Knowhow.

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