Employers have navigated a year of significant employment law changes in 2025. Looking ahead, 2026 promises further reform that will impact the employment law landscape in New Zealand. This Simpson Grierson update summarises the key developments of 2025 and highlights what employers should prepare for in the year ahead.
2025 Changes
Partial Pay for Partial Strikes
In July 2025, new legislation came into effect allowing employers to make pay deductions for staff engaging in partial strike action. Previously, employers could only accept the reduced output or suspend staff. The updated law reinstates the ability to make proportionate pay deductions. Employers may either calculate deductions based on the specific duties not performed or apply a standard 10% reduction. In our experience, most employers are finding it easiest to apply the 10% reduction when making these deductions.
Equal Pay
The Equal Pay Amendment Act abruptly, and significantly, reshaped the framework for pay equity claims. To bring a claim, employees must now provide evidence of both historic and current undervaluation, and the work must have been at least 70% female dominated for a decade. Employers are required to prioritise internal comparators before looking to other employers or the wider sector, and if no appropriate comparator exists, the claim cannot proceed.
Pay Transparency
In August 2025, the Employment Relations (Employee Remuneration Disclosure) Amendment Act 2025 strengthened employee rights to discuss their pay. Staff may now disclose their remuneration without fear of adverse treatment. Any adverse action taken by an employer in response to a ‘remuneration disclosure’ is now grounds for a personal grievance. The onus is on the employer to prove, on the balance of probabilities, that the remuneration disclosure was not the substantial reason for the adverse treatment.
2026 Agenda
Holidays Act Reform
Looking ahead, it has been announced that the Holidays Act 2003 will be replaced with a new Employment Leave Act. The reform introduces a simpler, more transparent approach including:
· annual and sick leave will accrue from day one based on hours worked, and staff will be able to take leave in hours rather than full days;
· leave will be calculated using a simplified single hourly rate;
· casual employees will receive a ‘leave compensation payment’ of 12.5% to cover both annual and sick leave entitlements;
· employees will have immediate access to bereavement and family violence leave;
· annual leave may be cashed up upon request, up to a maximum of 25% of an employee’s balance each year.
We consider these changes will provide much needed simplicity, removing many of the complexities that have led to significant underpayments and remediation processes under the current legislation.
Employment Relations Amendment Bill
This Bill, currently progressing through Parliament, proposes several important changes, with a Select Committee report due 24 December 2025. We expect this legislation will pass into law in the New Year.
One of the most significant changes is the contractor “Gateway Test”, a five-factor test intended to provide certainty on whether a worker is a contractor or employee. If all five factors are met, the worker is considered a contractor and cannot challenge that status. Independent contractors who do not meet all five factors can still challenge their classification using existing tests based on control, integration, and the fundamental nature of their work. This is particularly timely given the Supreme Court’s ‘Uber’ decision on 17 November 2025, which found that four Uber drivers were employees. The judgment reaffirmed the existing legal tests to apply when the Gateway Test is not met.
Other proposals in the Bill include limits on remedies where an employee’s own misconduct contributes to a grievance. An employee whose behaviour amounts to serious misconduct will not be eligible for any remedy, and an employee who has contributed to the personal grievance (but has not committed serious misconduct) will still be eligible for reimbursement of lost income but will be ineligible for reinstatement and compensation for hurt and humiliation, and loss of any benefit.
A new ‘high income threshold’ of $180,000 is also proposed, under which employees will not be able to pursue unjustified dismissal claims, significantly altering access to personal grievance protections for employees who earn above this threshold.
Employment Relations (Termination by Agreement) Amendment Bill
This Bill will allow employers to confidentially negotiate the end of an employment relationship by reaching an agreement with specified compensation. The agreement details will not be admissible in future legal proceedings. This Bill would provide greater flexibility and certainty in relation to the negotiation of staff departures. Although these can currently be negotiated under the general legal framework for “without prejudice” discussions, those discussions can be tricky to get right and open to challenge when an agreement has not been reached.
Preparing for Change
2026 will see a period of substantial adjustment for employers. Staying informed and proactive will help ensure compliance.
Please reach out to a Simpson Grierson expert if you would like to discuss these developments.
