Upcoming Employment Law Reforms: What Employers Need to Know

The New Zealand Government has recently announced a series of significant employment law reforms aimed at providing greater clarity and flexibility for businesses. These proposed changes, expected to be introduced through the Employment Relations Amendment Bill later in 2025, focus on three key areas: contractor classification, personal grievance claims, and remedies in employment disputes.

1. Contractor – New ‘Gateway Test’ Announced

In September 2024, the Government unveiled plans for a new ‘gateway test’ to assist businesses in determining whether a worker is a contractor or an employee. This change is designed to reduce confusion and legal disputes by offering clearer guidance around worker classification.

For business owners, this could mean more confidence and consistency when engaging contractors—particularly important for businesses that rely on flexible or project-based workforces.

To find out more, click here: Increased certainty for contractors coming | Ministry of Business, Innovation & Employment

2. Personal Grievance Claims – Income Threshold Introduced

Another significant proposal, announced in November 2024, is the introduction of an income threshold for personal grievance claims. Under this change, employees earning over $180,000 per year will no longer be eligible to raise a personal grievance for unjustified dismissal—unless both parties opt to include this protection in their employment agreement.

This reform aims to give employers more confidence when hiring for senior roles, ensuring that if the relationship doesn’t work out, it can be ended without the risk of lengthy, costly dismissal processes.

To find out more, click here: More flexible dismissal process for high-income employees | Beehive.govt.nz

3. Changes to Remedies in Employment Disputes

The Government has also proposed important changes to how remedies are awarded in employment disputes. These reforms aim to ensure fairness by recognising when an employee’s own conduct has contributed to the breakdown of the employment relationship.

Key proposed changes include:

• No remedies for employees guilty of serious misconduct

• No compensation for hurt and humiliation where the employee is at fault

• A requirement for the Employment Relations Authority and Employment Court to consider whether the employee obstructed the employer’s fair process

• Potential for up to 100% reduction in remedies if the employee contributed to the grievance

• A higher threshold for procedural error when the employer otherwise acted fairly

  
  

These changes aim to discourage poor conduct and ensure that remedies are only awarded where appropriate.

To find out more, click here:  Removing rewards for poor employee behaviour | Beehive.govt.nz 

What This Means for You

These upcoming reforms are designed to create a more balanced and predictable employment framework—particularly beneficial for small and medium-sized businesses. While these are proposed changes and still need to pass through Parliament, it’s a good time to start reviewing your current employment agreements, policies, and contractor arrangements to ensure alignment with the likely direction of the law.

At Sass, we’re here to help you navigate these changes and keep your business compliant and protected. If you’d like to review your employment documentation or discuss how these updates may affect your business, get in touch with our team today.