Workplace Watch

Removal of PG and information rights for high income earners

The Bill introduces an earnings cap over which an employee cannot bring a personal grievance (PG) for unjustified dismissal, or for unjustified disadvantage if it relates to the dismissal. For those high earners, it also removes the requirement to provide information, and allow an employee to comment on that information, before making a decision to dismiss.

The earnings cap has been set at $200,000 and covers all earnings, including bonuses and share schemes. The threshold calculation is retrospective, looking at actual earnings over the previous 12 months. This means that employees with variable pay components earning close to the threshold may or may not meet that threshold on any given day.

This is a surprising degree of complexity for a government which has previously stated it is determined to simplify labour-related regulation. The threshold will be adjusted annually, beginning 1 July 2027, to reflect changes in Statistics NZ’s average weekly earnings data.

The income cap will be introduced immediately for new employees and will be applied to existing employment agreements after a 12-month transition period - provided the employee remains with the same employer in the same role or is moved as part of a broader workplace restructure.

This change will require employers to consider whether or not they wish contractually to opt in to personal grievance and information rights for higher income earners. Employers will also need to review their existing arrangements to ensure that they do not unintentionally contract into rights that they would not otherwise want to apply. For example, a contractual commitment to follow a fair process with an employee prior to dismissal could give that high income earner the basis to challenge dismissal for a breach of contract.

These changes are entirely new for New Zealand, which has previously had a ‘one size fits all’ approach to employment rights. We anticipate the new regime will be welcomed by the many employers who wanted a more flexible approach that takes account of the potential higher bargaining power held by more senior employees. It more closely aligns New Zealand’s labour-regulation with that of Australia, which has had a similar income threshold in place for some time.

Some protections remain for higher income-earners with continuing obligations on both employer and employee to act in good faith, and with contractual, unjustified disadvantage (unrelated to dismissal), discrimination and health and safety-related claims preserved.

We may also see higher income earners start to try and negotiate additional protections for themselves, such as longer notice periods or lump sum exit payments.

New safe harbour for specified contractors

The Bill also clarifies the status of contractors through what is referred to as the contractor ‘gateway test’. This comprises five criteria which, when all are present, classify the worker as “a specified contractor”:

• there is a written agreement that specifies the worker is an independent contractor or, for businesses which do not use that characterisation (e.g., platform-based arrangements), that the worker ‘is not an employee’, and
• the worker is not restricted from working for others except while performing work for the principal, a non-restriction that will be deemed to apply even if someone is contracted to work the equivalent of full-time hours, and
• the worker

• is not required to be available to work certain times or days or for a minimum period, or

• is able to sub-contract the work either without vetting, or only with vetting necessary to ensure compliance with statutory requirements or as justified by the nature of the work, and

• the business does not terminate the arrangement because the worker has refused to accept an additional task, and
• the worker has had a reasonable opportunity to seek independent advice before entering into the agreement. 

As the Bill was first drafted, and even as it was reported back, the change would not have been retrospective but the Government introduced a late amendment when the House returned in February which provides that it will apply to pre-existing arrangements that are not already subject to legal challenge.

Given the strict requirements to be a ‘specified contractor’ we anticipate that there will be a limited group of contractors who will already meet this definition once the Bill receives royal assent. This will probably include Uber drivers – except for those who already have legal proceedings afoot when the new Act comes into force – rendering the Supreme Court decision somewhat nugatory.

Many existing contracting arrangements, however, will likely fall short of the requirements to either have no set hours of work, or the ability sub-contract with limited or no vetting. In those circumstances, updated contracts may be needed to achieve compliance.

If the new safe harbour is not available, the existing law will continue to apply to determine whether someone is ‘in reality’ an employee or contractor.

Other changes

These include:

• removing the requirement that, where there is a collective agreement in place, new employee employment agreements must reflect the collective terms for the first 30 days of employment (the 30-day rule)
• removing the requirement on employers to provide an ‘active choice’ form to new hires and to pass on any union-supplied information on the role and functions of unions
• reducing access to the PG regime, by:
• removing all PG remedies for employees whose behaviour is determined to amount to serious misconduct
• removing eligibility for reinstatement or compensation for hurt and humiliation when the employee’s behaviour has contributed to the issue that gave rise to the personal grievance
• requiring the Employment Relations Authority (ERA) and the Employment Court to consider whether an employee’s conduct obstructed the employer’s ability to meet their fair and reasonable obligations, and
• increasing the threshold for procedural error in cases where the employer’s actions against the employee are considered fair.

What does the future hold for these changes post-election?

If a National-led government remains in power post-election, we can expect this Bill to remain in place.

If a Labour-led government is successful then we expect the 30-day rules will come back (again) and all remedies will be reinstated, irrespective of the relevant employee’s alleged conduct. Labour has strongly opposed differential employment law based on income thresholds but – given that this already applies in Australia – may not assign its repeal here high legislative priority.

New Employment Leave Act to replace the Holidays Act

Legislation to replace the Holidays Act 2003 with a new Employment Leave Act was approved by Cabinet last year and is expected to be introduced this year.

Key changes include:

• a shift to hours-based accrual for sick and annual leave, enabling workers to take off only the hours they need rather than a whole day
• a pro rata sick leave system under which entitlements are proportionate to hours actually worked
• an upfront leave compensation payment for casual workers of 12.5% for each hour worked – instead of the current accrual system or 8% Pay-As-You-Go payment. Any hours worked on top of contracted hours will not accrue annual or sick leave but will attract the 12.5% entitlement
• employees will be able to access bereavement and family violence leave from the first day of employment
• new parents will receive their full pay for annual leave when they return from parental leave, described by Workplace Relations and Safety Minister Brooke van Velden as “a major shift from the status quo”
• employers will be required to provide clear pay statements each pay period, itemising pay and leave in a way that’s transparent and easily understood, and 
• a worker with a large annual leave balance will, with the employer’s assent, be able to cash up 25% each year. The current limit is one week per year.

A 24-month implementation period after the passage of the new legislation will enable a smooth transition for employers and payroll providers.

The need to remedy the Holidays Act is one of the few areas of common ground across parliament. Current indications are that the key policy changes announced by the Government have been well received. We are cautiously optimistic that this proposed new regime, if introduced during the course of this year, will survive the election irrespective of the result. Such an outcome would be a welcome change for New Zealand businesses.

Press statement

KiwiSaver updates

The default (or “do nothing”) rates of employee and employer contributions to KiwiSaver will increase from 3% to 3.5% on 1 April 2026, and then to 4% on 1 April 2028.

These rate increases are accompanied by a now-operative “temporary rate reduction” facility. An employee can opt down to a 3% contribution rate for a renewable period of up to 12 months, during which case their employer can also choose to reduce its contribution rate to 3%. The temporary rate reduction facility to keep contributions at 3% will also be available for when the default rate increases to 4%. 

Also on 1 April 2026, 16- and 17-year-olds (who became eligible for government contributions on 1 July 2025) will become eligible for compulsory employer contributions while making employee contributions to KiwiSaver.

As to the future, the National Party announced last November that if re-elected it would increase the default employee and employer contribution rates to 6%, in further annual increments of 0.5% of salary over the period 1 April 2029 to 1 April 3032. NZ First has also previously signalled support for continued increases to the default contribution rates.

Employees now freer to talk about their employment packages

Employees are now less at risk if they disclose or discuss their pay with others after the passage of a Member’s Bill promoted by labour MP Camilla Belich. The rationale behind the change is to increase transparency and to allow pay discrimination to be more easily identified.

The Bill does not prohibit pay secrecy clauses from being agreed to but creates a new personal grievance ground – “adverse conduct for a remuneration disclosure reason”. 

The Bill

Minimum wage

The minimum adult wage will increase 2% to $23.95 an hour on 1 April 2026.

Announcement

Supreme Court Uber decision

The Supreme Court has upheld the decisions of the Employment Court and the Court of Appeal in finding that the four Uber drivers who took the case against Uber were in fact employees rather than contractors. 

The ruling was unanimous, although the bench was split 3:2 on the reasons.

For those four drivers, the new Bill will not remove Uber workers’ entitlement to benefits accrued before the law change takes effect, nor will it affect the potential entitlements for of six NZ Post couriers who are the subject of proceedings brought by the Postal Workers Union of Aotearoa and which is to be heard by the Employment Court.

The key changes proposed in the Bill include:

• the introduction of a “critical risks” definition which must be prioritised ahead of the management of other risks
• the introduction of a “small PCBU” distinction (fewer than 20 workers) which will only be required to manage critical risks
• confirmation that officer due diligence duties are confined to those listed in the HSWA
• clarifying the scope of the officer due diligence duty is confined to the person’s role as an officer where an individual holds multiple roles (i.e. as a director and a manager)
• strengthening Approved Codes of Practice (ACOPs), making them ‘safe harbours’ for compliance, meaning that if a business complies with the relevant sector’s ACOP, it will have done enough to meet its health and safety requirements, and
• reframing WorkSafe’s role to focus on advising rather than regulating PCBUs. 

The focus on critical risks will be welcomed by PCBUs, but the definition is more limited than we expected. A notable exclusion is psychosocial risks which have been a WorkSafe focus in the past and are subject to increased regulation across the Tasman. 

Many businesses were keen to see the promised distillation of officer duties. The exhaustive list of what is entailed will be useful, but the attempt to delineate between officer duties and the duties associated with an officer’s other roles may not provide the clarity that had been hoped for.  For example, in the case of a CEO, it is difficult to see how that delineation will intersect with section 44(2) of the Health and Safety at Work Act which requires that an officer of a PCBU must exercise the care, diligence, and skill "that a reasonable officer would exercise in the same circumstances, taking into account the position of the officer and the nature of the responsibilities undertaken by that officer".

An obvious gap in the Bill is the lack of clarification about where responsibilities lie in circumstances when multiple PCBUs owe overlapping duties in respect of managing health and safety risks. This will be disappointing for many businesses given that confusion in this area has been the source of litigation and enforcement action from WorkSafe. 

The Bill has yet to go through the select committee process so there will be the opportunity to make submissions on these matters. 

Minister’s statement, article on the Institute’s response.