New Zealand Employment Law Changes 2025–2027 | Employer Guide
Ron Mckenzie | Februarty 16, 2025
Many New Zealand employers will face the biggest employment law reset in a generation between 2025 and 2027.
From contractor classification to holiday pay, dismissal rights and collective bargaining, the government is reshaping how employment relationships are legally defined.
Most of these reforms take effect in 2026, but decisions made in 2025 will determine whether you are protected or exposed when enforcement begins.
This guide explains what is changing, who it applies to, and how to prepare now.
What Is Changing in New Zealand Employment Law?
The reforms target five high-risk areas where employers are currently exposed to claims, audits and penalties:
| Area | Why It Matters |
|---|---|
| Contractor classification | Wage theft and misclassification now carry criminal risk |
| Dismissal rights | High-income employees may lose access to unjustified dismissal |
| Collective bargaining | Unions lose automatic onboarding control |
| Personal grievances | Employee misconduct will reduce compensation |
| Leave & holiday pay | A new system replaces the broken Holidays Act |
These changes are designed to rebalance power, reduce litigation and give businesses clearer rules, but only if contracts, payroll and onboarding are updated correctly.
1. Contractor Status Reform (The Biggest Risk Change)
From 2026, New Zealand will introduce a statutory “Contractor Gateway Test.”
If a worker meets the gateway, their contractor status cannot be challenged, even if they later claim employee rights.
To qualify, all of the following must exist:
A written contractor agreement
Freedom to work for other clients
No obligation to accept additional work
No fixed hours or days
The right to subcontract
A genuine opportunity to obtain independent legal advice
If any limb fails, the Employment Relations Authority (ERA) applies the old “real nature of the relationship” test, which is how most misclassification lawsuits succeed today.
Why this matters
Wage theft is now criminalised.
If you misclassify workers after 2026, you are no longer facing just backpay, but potential prosecution.
2. High-Income Employees and Unjustified Dismissal
From 2026, employees earning approximately NZ$180,000–$200,000+ may be excluded from unjustified dismissal claims, but only if:
They opt-in via their employment agreement
The clause is legally compliant
They still retain:
Discrimination claims
Bullying and harassment rights
Wage and holiday protections
This change gives employers greater exit flexibility for senior roles, but only if contracts are rewritten before renewal.
3. Collective Bargaining Rules Are Being Reset
Three union-favouring rules will be removed:
No more automatic 30-day placement on collective terms
No more mandatory active choice forms
New employees start on individual agreements unless they opt-in
This significantly reduces union leverage during onboarding, but only if your HR systems and templates are updated.
4. Personal Grievance Compensation Will Change
Currently, even badly behaved employees can receive full remedies.
The reform introduces contribution-based reductions:
If employee misconduct contributed to the situation
Compensation and reinstatement can be reduced
This protects employers who can prove fair process and documentation.
5. Termination by Agreement (New Exit Path)
A new protected process will allow mutual termination without later claims, provided:
The agreement is in writing
The employee receives independent advice
Statutory steps are followed
This creates a safe exit channel for difficult employment relationships.
6. Holidays Act Is Being Replaced
The Holidays Act will be repealed and replaced with a new Employment Leave Act.
Key changes:
Leave accrued by hours worked, not weeks
Simplified calculations
New rules for casual pay-as-you-go holiday pay
This fixes widespread payroll non-compliance but requires system upgrades.
7. Health & Safety Law Is Being Simplified
For small and low-risk businesses:
Fewer reporting obligations
Focus on real safety risks, not paperwork
Reduced compliance burden
This does not reduce liability for serious incidents.
Context: Risk Is Already Higher Than Ever
Three changes already in force dramatically increase exposure:
Wage theft is criminal
Pay secrecy clauses are banned
Pay equity thresholds are tighter
If your classification, pay, or leave systems are wrong, penalties are now far more severe.
What Employers Must Do in 2025
Waiting until 2026 is a mistake.
The businesses that avoid litigation are already preparing.
You should be doing now:
1. Rebuild contractor agreements
Not relabelled. Legally gateway-compliant.
2. Review high-income employment contracts
Add opt-out dismissal clauses before renewal.
3. Update onboarding systems
Collective vs individual agreements must be controlled.
4. Future-proof payroll and leave tracking
Your current Holidays Act system will become obsolete.
5. Prepare termination templates
So you can use the new mutual exit process safely.
Why Early Action Saves Money
Most employment claims do not come from bad intent.
They come from outdated contracts, wrong templates, and broken payroll logic.
These reforms give employers certainty, but only if they take advantage of them.
The cost of preparation is small.
The cost of remediation, audits, backpay and litigation is not.
Beginning-of-Year Employment Law Health Check
With so many changes scheduled between 2026 and 2027, early preparation gives employers more control, lower legal risk, and far fewer surprises.
A Beginning-of-Year Employment Law Health Check is a practical way to assess whether your current:
contractor agreements
employment contracts
leave and payroll systems
onboarding and termination processes
are aligned with the new regulatory direction.
Rather than waiting for new laws to force urgent fixes, a health check allows you to identify gaps early and plan upgrades on your own timeline.
If you would like to understand how prepared your business is for the upcoming reforms, a short review now can help avoid costly corrections later.
