You’ll soon be able to tell your lunch buddy what you earn; and other NZ employment law changes for 2025

Employment Hero, resposible for the world's first Employment Operating System (eOS), has released a roundup on a number of upcoming changes to New Zealand's employment law, commenting that despite first glance, a number of these could benefit both employers and employees in the long run.

Here's what's changing and what it means for Kiwis. 

An income threshold for unjustified dismissal claims
Probably the most hotly debated change is the introduction of an income threshold for employees claiming personal grievances for unjustified dismissal. The change means employees earning above $180,000 per annum will be unable to raise an unjustified dismissal claim.

(Note: Employers and employees will be able to opt back into unjustified dismissal protection if they choose to, or negotiate their own dismissal procedures between them.)

For employers, the change enables businesses to ensure they have the best fit of skills and abilities for their organisation, allowing employers more flexibility in hiring for senior positions, without having to risk a costly and disruptive dismissal process if things don't work out. 

A similar change has already been implemented in Australia. If we look across to the impact of this legislation, we can see this change has allowed for employers and employees to have a more open and frank conversation. In some respects, this will create transparency and will allow performance concerns to be addressed quickly.

A reduction in personal grievance payouts 
In a related announcement, the government also introduced further changes to remove or significantly reduce 'remedies' for employees when they are found to be at fault in employment disputes, for example, when an employee's behaviour has contributed to the breakdown in the employment relationship.

This includes removing all remedies for employees whose behaviour amounts to serious misconduct and removing eligibility for reinstatement in a role or compensation for hurt and humiliation when the employee is found to be at fault. 

These and a number of other proposed changes could give employers more confidence during employment disputes by increasing employee accountability.

Alongside the introduction of the personal grievance income threshold, these changes are expected to be progressed through the Employment Relations Amendment Bill later this year. 

An end to 'Pay secrecy' 
Changes are also  afoot for the rules around pay secrecy in New Zealand. The Employment Relations (Employee Remuneration Disclosure) Amendment Bill passed its first reading in parliament in November 2024, and seeks to allow employees to discuss or disclose their remuneration with others if they wish to. 

As the law stands currently, some employment contracts may include terms prohibiting employees from discussing or disclosing their remuneration (including salary, wages and other conditions) to third parties, including other employees of the same employer.

While the Bill will take several months to move through the parliamentary process before it is implemented, if it is enacted into law, it will mean employers can no longer include any clauses in employment contracts prohibiting employees from discussing their pay with others. What's more, Under the proposed change, if an employer disadvantages or dismisses an employee for disclosing their pay (or enquiring about a colleagues' pay), the employee is entitled to make a personal grievance claim.

Many employees are welcoming this change, especially in the current job market. However, SME employers continue to express concerns around the pressure to match wages within the workplace or increase salaries to match their competitors. (More here.) 

Pay deductions for strikes reintroduced 
In December 2024, the government introduced a Bill into parliament that will allow employers to make pay deductions in response to partial strikes.

Currently, if an employee is engaged in a partial strike, their employer cannot deduct their pay unless they suspend the employee or issue a lockout notice.

Once again, this is a contentious change that will restore employers' ability to make pay deductions for partial strikes if implemented. The upside, however, is that it could help incentivise both parties to reach agreement sooner, while also minimising community impacts. (The Bill is currently in the select committee stage of the parliamentary process. Track its progress here.)

Contractor 'gateway test' will be implemented later this year
Lastly, in September 2024 the government announced that it would introduce a 'gateway' test for businesses to distinguish the difference between an employee and a contractor.

The change aims to provide greater clarity for business owners when choosing to bring in contractors to complete work, and reduce disputes over classifications. These proposed changes are expected to be implemented through an Employment Relations Amendment Bill, set to be introduced later in 2025. (More here.)

The Holidays Act is still a work in progress
In addition to these changes, legislative and regulatory reviews of The Holidays Act are also ongoing…

Setting the foundation for  leave and payroll regulations in New Zealand, The Holidays Act has been through various rounds of consultation since 2018, with many employers and payroll providers finding it difficult to navigate. In December 2024 the government announced that it would begin working on a new, hours-based accrual model for annual leave, which is expected to take some time to deliver.

The government indicated that clarity will be sought from Cabinet later in 2025, signalling its intention to pass a new Act by the end of the current parliamentary term (late 2026).

For now, however, the Act remains in place in its current state meaning employers will need to continue ensuring holiday leave and payments are processed in line with the Act in its current state. 

From enabling more open conversations about performance and fostering accountability in employment relationships, the 2025 reforms are a shift in a new direction for New Zealand.. While some changes this year may spark debate, they also present opportunities for employers to make informed decisions, whilst striving to achieve a balance when it comes to access to justice. Employment Hero will continue to monitor developments and provide insights to help New Zealand confidently navigate these changes as they unfold.