Employment Relations Amendment Act Passes Final Vote, Major Workplace Reforms Ahead

The Employment Relations Amendment Bill has passed its third reading in Parliament, marking a significant shift in New Zealand's workplace law aimed at boosting business confidence, improving hiring flexibility, and strengthening accountability in employment arrangements.

Workplace Relations and Safety Minister Brooke van Velden welcomed the Bill's passage, calling it a milestone reform designed to better balance the needs of employers and workers in a modern labour market.

"I am proud to see the Bill pass as law, bringing these reforms to life and fixing what really matters for employers and workers," Ms van Velden said.

"This Bill is about backing business to hire with increased confidence. When employers can hire and grow their business with confidence, more people get opportunities. That means more jobs and higher paid jobs."

A Major Reset for Employment Relations

The new Act introduces reforms that the Government says will rebalance employment relations settings and create greater certainty for businesses while preserving opportunities for workers.

"Rebalancing the employment relations settings, as this law does, brings more choice for businesses and workers to create and enter working arrangements that suit their individual needs," Ms van Velden said.

The reforms come at a time when employers across sectors have raised concerns about compliance complexity, hiring risks, and unclear boundaries between contracting and employment.

Key Changes: Contractor Clarity Through a New Gateway Test

One of the most significant innovations in the Act is the introduction of a four-part "gateway test" to clarify whether a worker is a contractor or an employee.

The Government says this will provide greater legal certainty from the beginning of contracting arrangements, reducing disputes and costly litigation for both businesses and workers.

This measure is expected to be particularly important in fast-growing sectors such as construction, technology, and the gig economy, where contracting arrangements are increasingly common.

Serious Misconduct: Ending Pay-Outs That Reward Poor Behaviour

The Act also strengthens accountability provisions by ensuring that employees guilty of serious misconduct are not financially rewarded through compensation pay-outs.

The Government argues that this change restores fairness in the system and reinforces workplace expectations around behaviour and responsibility.

"Ensuring accountability for serious misconduct and poor behaviour means the law stops pay-outs that financially reward employees for serious misconduct," Ms van Velden said.

New $200,000 Income Threshold for Unjustified Dismissal Claims

Another major reform is the introduction of an income threshold of $200,000 for unjustified dismissal personal grievances.

Under this provision, employees earning above this level will no longer be able to bring personal grievance claims for unjustified dismissal.

The Government says the change will encourage employers to take more chances on hiring for high-impact leadership and specialist roles, without fear of costly and disruptive dismissal processes if arrangements do not work out.

This aligns New Zealand more closely with approaches used internationally, where senior executive roles often involve different contractual protections.

Removing the 30-Day Rule: Greater Freedom From Day One

The Act also restores freedom for workers and employers to negotiate employment agreements immediately, by removing the existing 30-day rule.

This means businesses and new employees can agree on their own employment terms from the first day on the job, rather than being required to follow a default collective agreement period.

The Government says this reform will increase flexibility, speed up hiring processes, and allow tailored agreements that reflect individual circumstances.

Implementation Timeline

Most of the changes will come into effect the day after the Bill receives Royal assent, meaning businesses and workers can expect rapid implementation.

"This Government is committed to maximising business confidence and accelerating business growth, and today's changes advance both," Ms van Velden said.

What This Means for Employers and Workers

The Employment Relations Amendment Act is expected to have wide-reaching impacts across the labour market, particularly in areas such as:

• contractor engagement and workforce structuring

• executive-level recruitment

• dismissal processes and misconduct accountability

• employment agreement negotiations

Supporters argue it will reduce uncertainty and compliance costs, while critics are expected to scrutinise impacts on employee protections.

As Royal assent approaches, businesses, unions, and employment law specialists will be watching closely as the reforms begin to take effect.