2025 was a year of transformation in the NZ employment landscape, with the introduction of numerous bills and reviews, and proposed amendments to employment related issues. The overall goal being to make NZ businesses more competitive. There were two main strategies to achieve this goal - by increasing labour market flexibility and reducing compliance costs for businesses.
While some of the changes are undergoing parliamentary review, other key changes have already come into effect:
· Employers are required to provide employees with access to their individual employment agreements within 7 working days of a request
· The adult minimum wage rate increased to $23.50 per hour from 1 April 2025 and the starting out wage increased to $18.80 per hour
· Some existing employment agreements include pay secrecy clauses allowing employers to take disciplinary action against an employee disclosing their salary or wage rate. Employers are now prohibited from taking such action against employees who share their remuneration details.
· It is now a criminal offence for an employer to intentionally make unauthorized wage deductions from their employees pay, without reasonable excuse.
· The Government contribution to KiwiSaver reduced from 50c per dollar contributed to 25c with a maximum annual contribution of $260.72. There were also some changes to the eligibility criteria, with the government contribution being limited to members earnings $180,000 or less of taxable income per year and 16 and 17 years old becoming eligible for the government contribution.
The following changes are proposed under the Employment Relations Amendment bill, which is currently at the second reading phase in Parliament:
- Clearer Rules for Contractors
A new gateway test has been proposed to determine who qualifies as an independent contractor. This has the potential to reduce conflict over whether someone is an employee or a contractor, and whether they are entitled to employee benefits or not. The requirements to qualify as a contractor include having a written agreement in place specifying the relationship is principal-contractor, and work flexibility such as the freedom to work for others, no fixed hours and being able to subcontract work.
- New Dismissal Rules for High Earners
Under the proposal, employees earning over the threshold (suggested threshold $180,000) would not be eligible to bring unjustified dismissal claims, unless their employment agreement specifies otherwise. The aim being to give businesses greater flexibility when recruiting or dismissing top-level employees. It is proposed this change will apply to new employees immediately and all employees after a 12-month transition period.
- Removal of 30-day Rule
Under current legislation, the initial 30 days of employment for new employees must mirror collective agreement terms (where applicable). The removal of this 30-day rule would allow the immediate use of individual agreements, as well as the immediate start of the 90-day trial period. It would also remove some of the administration regarding union membership. This change would make it easier for new employees to be dismissed without grievance claims.
- Personal Grievance Claims
Where an employee is found to have contributed to the circumstances of a personal grievance claim, any compensation could be reduced by up to 100%. Where an employee has engaged in serious misconduct, they will not be entitled to any compensation or be reinstated. Authorities will also need to consider whether an employee’s behavior has made it harder for their employer to act fairly. The aim of these amendments is to make workplace dispute resolutions fairer, by considering both the employees’ and the employers’ actions leading up to a dispute and preventing employees from benefitting when their own actions led to their dismissal.
Another bill currently at the second reading phase in Parliament is the Employment Relations (Termination of Employment by Agreement) Amendment Bill.
- This proposal allows employers and employees to mutually agree to end employment. The termination agreement would include a specified sum in full and final settlement and negate the risk of future legal claims. There is no requirement for there to be an employment issue occurring to use this option, and such an offer would not be ground for personal grievance.
In August 2025, the Government announced the intention to repeal the Holidays Act and replace it with the Employment Leave Act. The aim of the proposed Act is a clearer, more workable system that reduces errors and compliance cost for administering payroll.
The proposed changes include:
- Annual leave and sick leave to accrue in hours (currently accrued in weeks)
- Employees will earn sick leave in direct proportion to their contracted hours
- Leave will accrue while on paid leave, parental leave, jury service or volunteering, but not during ACC or unpaid leave
- For hours worked by casual employees and hours worked over and above contracted hours for other employees (except where those hours are compensated by salary), there will be a 12.5% upfront leave compensation payment in lieu of annual and sick leave accrual.
- Employees will be able to cash up 25% of their annual leave balance as at their last employment anniversary
- Ordinary working day test for public holidays (whether they worked 7 of the last 13 weeks on that day)
Further changes to the KiwiSaver scheme flowing from the Budget 2025 that will come into effect during the 2026 year include:
- The default employee and employer contribution rates will rise from 3% to 3.5% from 1 April 2026 (however there is the option for members to apply to IRD to keep the rate at 3% for up to 12 months)
- 16- and 17-year-olds in paid employment will become eligible for mandatory employer contributions if they join and contribute to KiwiSaver
For those of you in business you may want to start considering how these changes might impact your business. The proposed changes are not final until the relevant Bill is passed, meaning the existing rules still apply for now. Some of the changes allow for an implementation period between when the Bill is passed and when it comes into force, allowing time for payroll providers and employers to make the necessary changes. If you are an employer, you may like to consider reviewing your employment agreements to ensure they are up to date and comply with the current standards and obligations. If you have contractors, it would be prudent to make sure you have a suitable written agreement in place.
