Big changes are here: What the Employment Law shake-up means for NZ Employers

More flexibility, less red tape… but only if you get it right.

Employment law doesn’t change quietly in New Zealand; and yesterday's update is no exception.

The Employment Relations Amendment Act 2026, which came into force on 21 February, is one of the most significant shifts we’ve seen in a while. It’s been positioned as a move toward clarity, flexibility, and reducing compliance pressure for employers; but as always, the detail is where things get interesting. So, what does this actually mean in practice?

Contractors - the Gateway test

One of the biggest changes is the introduction of the “gateway test” for contractors.

In simple terms, if a working arrangement meets this test, the person is a contractor - full stop.

They won’t be able to turn around later and challenge that status through the ERA or Employment Court. This is clearly a response to the growing number of disputes (think Uber and beyond), where businesses thought they had contractors, and the Courts said otherwise.

But, and it’s an important “but”, if the gateway test isn’t met, we’re right back where we’ve always been. The Courts will still look at the real nature of the relationship, not just what the contract says. So labels still won’t save you if the reality doesn’t stack up.

PG remedies

There’s also been a pretty significant tightening of personal grievance remedies. If an employee’s serious misconduct contributed to the situation, they may now lose access to remedies altogether. In less serious cases, remedies like reinstatement or compensation for hurt and humiliation may be off the table. Lost wages can still be considered - but the ERA and Courts now have more discretion to reduce what’s awarded.

For employers, this potentially reduces some of the risk that has historically come with messy situations. But it doesn’t remove the need to follow a fair process — that still matters.

High earners, different rules

Another headline change is the introduction of a high-income threshold. Employees earning over $200,000 base salary will no longer be able to raise a personal grievance for unjustified dismissal (unless their employment agreement specifically allows for it).

This doesn’t apply to everything (claims like discrimination are still in play), but it does change the landscape for senior roles. There’s also a transition period for existing agreements, so this isn’t an overnight shift, but it’s definitely one to watch if you employ senior or executive staff.

A few quiet but still important changes...

Some of the smaller changes will still have a noticeable impact day-to-day:

1. The 30-day rule is gone meaning new employees don’t have to mirror collective agreement terms for their first month.

2. Trial periods have effectively been strengthened, limiting employees’ ability to challenge dismissals where a valid trial period has been used correctly.

3. And importantly, the justification test has been tweaked. Procedural mistakes on their own won’t automatically make a dismissal unjustified anymore; unless those mistakes actually led to unfair treatment. That’s a subtle shift, but a meaningful one.

This Act is clearly trying to rebalance things; giving employers a bit more confidence and flexibility, while tightening up some of the more complex areas of the law.

But it doesn’t mean you can relax.

• If anything, it raises the stakes in a different way.

• Contractor arrangements need to be genuinely robust.

• Employment agreements — especially for higher earners — need to be deliberate and well thought out.

• Processes still need to be fair, reasonable, and defensible.

Because while some risks have reduced, others haven’t gone anywhere.

This is one of those changes that looks straightforward at a glance, but has layers. Done well, it could make things easier for employers. Done poorly, it could create a false sense of security that leads to bigger issues down the track.

If you’re reviewing contracts, looking at contractor arrangements, or just trying to make sense of what this all means for your business now’s a good time to get clear on it.

And if you want a second set of eyes on how this applies to your workplace, you know where to find me.

Disclaimer This article, and any information contained on our website is necessarily brief and general in nature, and should not be substituted for professional advice. You should always seek professional advice before taking any action in relation to the matters addressed.