What the Proposed Employment Relations Amendment Bill 2025 Actually Means for Workplaces

The Government has introduced the Employment Relations Amendment Bill 2025, and it’s shaping up to be one of the bigger shifts in employment law we’ve seen in a while. The aim of this Bill is to make things more flexible for businesses and cut back on some of the current complexity, but the changes will affect both employers and employees in some fairly meaningful ways. 

1. A new test for contractors 

1. High earnings losing the automatic right to claim unjustified dismissal 

1. Changes to remedies in personal grievance cases 

1. The end of the 30-day rule 

Here’s a clearer look at what’s being proposed and what it could mean in practice.  
 

1. A New Test for Contractors

Currently the test is based on the real nature of the relationship regardless on contract label. Meaning, if an individual is contracted as a contractor but their role more reflects one of an employee’s then they can argue that the agreement doesn’t accurately reflect the true nature of the relationship so they can gain employee rights despite the written agreement. 

The Bill introduces a new “gateway test” set out in s6(7), to help decide when someone is truly a contractor, rather than an employee in disguise. This test is more objective and stricter; If the working relationship ticks certain boxes like having a written contract that says they’re a contractor, being allowed to subcontract work, not being locked into regular hours, and being given a chance to get legal or financial advice then that person becomes a “specified contractor.” Once someone falls into that category, they can’t later argue they were actually an employee. 

In practical terms, s 6(7) of the Bill creates a new type of worker in New Zealand. Until now, both the Employment Relations Act and the common law have recognised only two categories, employees and genuinely independent contractors. The Bill introduces a third group: workers who may look and operate much like employees, in that they are controlled by and integrated into the business, but who can still be treated as contractors if they satisfy the new test set out in s 6(7). 

What this means in real life: 

• Businesses get a bit more certainty around contractor arrangements. 

• People working in more vulnerable or low-control contractor roles may lose the ability to challenge their employment status. 

• It could reduce some grey areas, but it also shifts the balance toward the business. 

2. High Earners Losing the Automatic Right to Claim Unjustified Dismissal

Currently all employees can raise a personal grievance for unjustified dismissal. 

One of the more controversial changes is the introduction of a salary threshold. Under the Bill, anyone earning $180,000 or more in base salary would no longer automatically be able to bring a personal grievance for unjustified dismissal. 

The new s 67I takes away the requirement for employers to follow the good faith obligations in s 4(1A)(c) of the Employment Relations Act 2000. This means employers would no longer have to give affected employees the reasons, evidence, or information behind a termination decision before that decision is made final. 

There is a transitional period for the employees who are already employed on a higher salary. Employees and employers can choose to opt back in, but this will need to be written into the agreement. 

How this plays out: 

• Employers may feel more confident making senior appointments without the risk of an expensive dismissal process. 

• It may open up space to mistreat senior employees if there are no legal consequences. 

• Senior employees will have to pay closer attention to what their contracts actually say. 

• Negotiation around these protections is likely to become a bigger part of hiring for higher-level roles. 

3. Changes to Remedies in Personal Grievance Cases

Currently, remedies (reinstatement, compensation for lost wages/distress) are available, with up to a 100% reduction possible but rarely applied for personal grievance case. 

Under the new framework that the bill proposes, employees whose behaviour amounts to serious misconduct may lose all their entitlement to remedies, including compensation. Sections 123A (4A), and 123B require the Authority or the court to not provide any remedies where an action of an employee contributed to the situation giving rise to a personal grievance if that contribution amounts to serious misconduct. The Authority and the Court would also have the ability to reduce remedies by up to 100% where the employee has contributed to the situation. 

In addition, procedural flaws on the employer’s part would no longer automatically result in a finding of unfairness unless those errors can be shown to have caused real harm to the employee. 

What this means: 

• There are essentially no remedies available for cases involving serious misconduct. 

• Misconduct matters more and can affect the outcome significantly. 

• Employees will have to show the employer’s actions were the real source of the unfairness. 

• Employers still need to follow a fair process, but minor errors won’t carry as much weight as they currently do. 

4. The End of the 30-Day Rule

Currently under section 62 of the ERA, new employees in a workplace with a collective agreement must be employed on terms consistent with that agreement for the first 30 days. 

The Bill employers and new employees can negotiate individual terms from the start of employment. Employers must still inform employees about the existence of a collective agreement and the relevant union.  It also removes some union-related requirements around giving new employees certain information when they begin work. 

What changes for workplaces: 

• Employers can offer individual agreements from day one. 

• It may make collective bargaining less influential in some industries. 

• New employees may receive a wider range of contract offers depending on the workplace. 

• Reduced union access 

So What Does All This Mean? 

Taken together, these proposals signal a shift toward greater flexibility for employers, increased reliance on individual negotiation, narrower pathways for bringing personal grievances, and clearer rules around the distinction between employees and contractors.  
Supporters see this as a practical update that reflects modern workplaces. Critics argue it pulls back too many employee protections, especially for higher earners and contractors.