The year ahead in employment law: what to expect in 2025

In the last few months of 2024, the Minister of Workplace Relations and Safety (Minister) announced a raft of potential changes to Aotearoa New Zealand’s employment law framework. Further detail will be announced by the Government in due course, but below is a snapshot of what to expect in 2025.

More flexible dismissal processes for high-income employees

The Minister is proposing to introduce an income threshold of $180,000 per year for unjustified dismissal personal grievances. This would mean that employees earning more than $180,000 a year would be prevented from raising claims against their employer regarding their dismissal. The aim of this is to allow employers a degree of flexibility to ensure that they have the right fit for high-impact leadership and specialist roles within their business, without having to risk a costly dismissal process if things don’t work out.

According to the Minister, the income threshold would account for 3.4% of the workforce and aligns with the top tax bracket. The change mirrors similar legislation across the Tasman. Unlike in Australia however, which has seen a flurry of litigation surrounding what counts as ‘income’, it has been proposed that the threshold would apply to base salary only and exclude other income.

Notably, there remains an option to contractually opt back in to the unjustified dismissal scheme, and the proposed legislation does not affect an employee’s ability to raise other types of personal grievances. If the proposed changes are passed into law, it is possible that we will see a rise in employees reframing their claims as unjustified disadvantages or negotiating higher compensation and other benefits to compensate for not being able to raise an unjustified dismissal claim.

Removing rewards for poor employee behaviour

Reforms have also been announced relating to employee misconduct and personal grievance remedies. The changes would include preventing employees who have engaged in behaviour amounting to serious misconduct from being awarded remedies, for instance, in a circumstance where there had been a procedural deficiency in a termination process, but substantive reason to terminate. There would also be changes to allow for significant reductions to remedies where the employee is deemed to have contributed to the grievance.

You can find a detailed discussion on these changes in our previous article here.

Minimum wage set for 2025

The minimum wage will increase to $23.50 (from $23.15) per hour for adults from 1 April 2025.

Contractor arrangements

Currently, the distinction between independent contractors and employees is determined by the Employment Relations Authority and the Courts, by looking at the ‘real nature of the relationship’, rather than simply the way it is described on paper.

The Minister is proposing a new gateway test. The ‘real nature of the relationship’ assessment will only apply when one or more of the following factors are not met:

• a written agreement, stating the worker is an independent contractor;
• the ability for the worker to work for other businesses, including competitors;
• no requirement for the worker to be available to work on specific days, times of day or for a minimum number of hours, or the ability for the worker to subcontract the work; or
• the business not terminating the contract if the worker does not accept an additional task or engagement.

The Minister considers that this will provide much needed certainty for businesses and workers alike, with amending legislation to facilitate the change predicted to be introduced this year. If passed, it remains to be seen whether these changes will achieve the goal of reducing the number of lengthy and costly legal proceedings to determine an individual’s employment status, however it is certainly an area to watch in 2025.

Employment Relations (Termination of Employment by Agreement) Amendment Bill

A new Member’s bill was introduced into Parliament in early November 2024 proposing “risk-free” exit negotiations for employers.

If passed in its present form, it would mean that employers and employees could mutually agree to bring the employment relationship to an end by way of a negotiated settlement and if agreed, would prevent an employee from pursuing a claim against the employer. Additionally, pre-termination negotiations would be inadmissible in future proceedings, however this would be subject to certain requirements and discretion by the Employment Relations Authority. Accordingly, if this is to come into force, employers should exercise caution when managing these negotiations.

The Bill is currently awaiting its first reading, and you can keep updated on progress through the House here: Employment Relations (Termination of Employment by Agreement) Amendment Bill

Holidays Act

The Government has previously committed to reforming the Holidays Act 2003, with the aim of reducing complexity and compliance costs for employers. The Minister recently announced that there will be significant changes to the draft Holidays Act reform bill following targeted consultation.

One key change being considered is introducing an hours-based accrual model for annual leave. It is considered that this model would simplify compliance for employers in several ways, including as several payroll systems calculate leave in this manner already. This change in direction will delay the introduction of a bill to Parliament, but the Minister has signalled hopes that changes to existing legislation would still be passed during this parliamentary term.

Summary

The employment law arena is constantly evolving, and 2025 looks set to be no different. Our team will be monitoring these and other relevant updates throughout the year. If you have any questions about how you or your business may be impacted by these, or any other changes should they come into force, please feel free to reach out to our employment team.