New Zealand is undergoing its biggest employment law shake‑up in years, with sweeping changes to dismissal rights for high earners and a complete Holidays Act rewrite set to transform how leave, pay and risk are managed across every workplace
Employers across Aotearoa are facing the most significant shake‑up to workplace law in years, as sweeping reforms to the Employment Relations Act take effect and a complete rewrite of the Holidays Act moves through Parliament.
Dentons special counsel in the employment and labour team, Charlotte Evans said the changes mark “an interesting time” for both employers and employees as the balance of rights and obligations is reset across the labour market.
Employment Relations Amendment Act: high earners and remedies in the spotlight
The centrepiece of the recent reforms is the Employment Relations Amendment Act 2026, which came into force on 21 February, the day after receiving Royal assent.
The Act delivers four major shifts. First, it finally introduces a statutory definition of “specified contractors”. Those who fall within that category cannot challenge the “true nature” of their working relationship, closing off a route often used to argue that contractors were in fact employees.
Second – and most controversially – the reforms remove the right of high‑income earners to bring a personal grievance or legal proceedings in relation to termination, provided certain criteria are met. The threshold has been set at total remuneration of $200,000 or more, and crucially this figure includes not just base salary but also bonuses, share schemes and any other monetary benefits.
“It’s very much what do we do for these employees,” Evans said. “Do we just stay silent, or do we look to pre‑emptively negotiate something into contracts? And how can we still attract the best talent that we want?”
While this carve‑out removes the right to challenge most dismissals, discrimination, sexual harassment and racial harassment claims remain fully protected.
The third major change is a radical tightening of remedies. Where an employee’s conduct amounts to serious misconduct, the Employment Relations Authority and Employment Court will no longer be able to award any remedies.
Where serious misconduct is not established but the employee has contributed to their situation, remedies are also curtailed: hurt and humiliation compensation and reinstatement are off the table if contribution is found.
The fourth change is to collective bargaining. Previously, new employees covered by a collective agreement had to be employed on those terms for the first 30 days. That protection has now been removed, with employers free to negotiate individual terms from day one, even where a collective coverage clause exists.
Evans noted that while the letter of the law has shifted decisively in favour of employers, the courts are unlikely to allow a free‑for‑all.
“We can make a reasonable guess that [the new thresholds] will be read quite narrowly,” she says. “It’s also not going to give an employer the freedom to just do what they want… there still will be protection for employees.”
For now, many key concepts – particularly “serious misconduct” and “contribution” – remain undefined in the new regime and will need to be fleshed out through case law. “These are questions we’re not going to have an answer to until they’ve been in front of the Employment Court,” Evans added.
Holidays Act: complete rewrite and 24‑month transition
Running in parallel is a wholesale rewrite of the problem‑plagued Holidays Act 2003, which has driven years of underpayments and compliance confusion for employers.
The government aims to pass the new Holidays Act this year, with a generous implementation runway: employers will have 24 months from enactment to get their systems, contracts and payroll practices in order before the new regime fully commences.
Evans described it as “a complete rewrite” designed to fix everything that has caused issues over the past two decades. One of the most significant changes will be moving away from recording annual leave in weeks. Instead, employees will begin accruing annual leave from day one of employment, based on their standard hours.
To underpin this, the legislation will distinguish between standard, additional and casual hours. Standard hours will generate leave accrual, while additional and casual hours will attract a monetary top‑up – a 12.5% payment on top of normal pay, in lieu of additional leave.
Sick leave will also accrue from day one, removing the current six‑month stand‑down before entitlements begin. However, in a major shift for part‑time staff, entitlements will be pro‑rated to actual hours worked, ending the current situation where employees working one day a week can end up with 10 days’ sick leave.
Casual employees, who previously received an 8% loading, will see that uplifted to 12.5%, to reflect both annual leave and sick leave they do not accrue in the usual way.
Recognising the enormous scale of the transition, the new scheme will include a formal remediation pathway for lingering non‑compliance under the old Holidays Act – potentially allowing employers to regularise historic issues and “start fresh”.
What employers should be doing now
With change arriving on multiple fronts, Evans urged employers to act early rather than waiting for deadlines to loom.
First, she advised businesses to urgently review their employment agreements, particularly around leave and sick leave clauses. Many contracts simply promise “10 days” sick leave without referencing the Holidays Act or statutory minimums, which could leave employers stuck providing more than the Act requires once entitlements become pro‑rated.
“Make sure you’ve got the space or the ability to just reflect statutory minimums, unless you want to offer more,” she said.
Second, HR and finance leaders should be engaging with payroll providers now to confirm whether their systems will be able to handle the new accrual rules, classifications of hours and percentage loadings. “Starting to look at your payroll providers and having those conversations with them” will be critical, Evans noted.
Third, proactive communication with employees will matter. As part‑time staff adjust to pro‑rated sick leave and some workers lose perceived entitlements, misunderstanding and mistrust could easily arise. Evans suggestsed explaining clearly that entitlements flow from statute and will move in line with legislative change – and that in many cases full‑time employees will see little difference in overall value.
On the Employment Relations Act side, employers should also be considering their strategy for high‑income staff, including whether to contract some rights back in for senior hires, and how to position these issues in recruitment discussions without undermining the new flexibility the law offers.
A more employer‑friendly landscape – with caveats
While many of the reforms are aimed squarely at easing the compliance burden and giving businesses more scope to move employees on, Evans cautions that New Zealand’s strongly pro‑employee legal culture will continue to shape how the courts interpret the new laws.
“I think it would be very much against how the Employment Court operates” to take an overly broad view of concepts like serious misconduct and contribution, she said.
For now, HR leaders should treat the next two years as an intensive preparation period: cleaning up contracts, auditing leave and payroll practices, planning their approach to high earners, and investing in employee education.
“They will be given a significant amount of time,” Evans concludes, “but it will be using that wisely.”
