New Zealand's employment framework is being rebuilt on two fronts at once. One reform, already law, changes how dismissals are judged and gives more weight to employee’s own contributions. The other, which has just passed its third reading as awaiting royal assent, would scrap the leave regime employers have wrestled with for two decades.
A softer landing for imperfect process
The revised s 103A of the Employment Relations Act 2000 narrows the long-standing rule that a flawed process sinks a dismissal. Procedural defects alone no longer render a dismissal unjustified where they did not cause the employee unfair treatment. That is a meaningful shift in risk: a defensible-but-imperfect process now carries less exposure than it did. However, a predetermined outcome dressed up as a process will still fail.
Contribution becomes the main lever on quantum
Under ss 123B–123C and s 124, where an employee contributed to the situation, the Employment Relations Authority may reduce remedies by up to 100%, and there is no reinstatement and no hurt-and-humiliation award where conduct contributed. Serious misconduct can allow the Authority to refuse remedies entirely. It seems that contribution has moved from a discount at the margins to the decisive question on value. However, we are yet to see how the Authority will apply this in practice.
Leave, rebuilt in hours
The Employment Leave Bill 2026 repeals and proposes to replace the Holidays Act 2003 with a simpler hours-based system. Annual and sick leave would accrue in hours against standard hours from the first day of work, and entitlements would be recorded and paid in hours rather than days or weeks, for greater certainty. Sick leave would be capped at 160 hours — a ceiling equivalent to 20 days for a 40-hour week — with a 12.5% Leave Compensation Payment forming part of the new proposed regime for casual workers.
Summary
We will continue to monitor employment law updates and advise our clients accordingly.
Wondering what these changes mean for you as an employee, or an employer? Get in touch with the experienced employment team at Godfreys Law for any concerns or queries you may have.
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