For New Zealand SMEs, last year was defined by regulatory updates and operational strain. But in 2026, the legislative landscape is recalibrating.

“Employment law has been up and down in 2025,” says Sanam Ahmadzadeh Salmani, Employment Counsel at Employment Hero, addressing Kiwi business owners. And while 2026 will also bring change, “I believe a lot of these changes are going to really help employers.” 

Ahmadzadeh Salmani says the shift stems from government efforts to simplify the compliance framework, referencing a suite of proposals designed to reduce administrative friction and provide businesses with more practical certainty in their daily operations.

Embed The Latest Changes Before New Laws Set In

Ahmadzadeh Salmani says before getting their heads around 2026 changes, small business owners should ensure they’ve acted upon laws introduced last year, namely involving wage theft and pay secrecy.

The Crimes (Theft by Employer) Amendment Act 2025, introduced in March, made the intentional failure to pay wages a criminal offence, with the threat of seven years’ imprisonment for an individual. For companies, “malicious” withholding is now a matter for police, not just the Labour Inspectorate.

“If you didn’t know about this, then now’s the time for you to get up to speed. You still have time,” Ahmadzadeh Salmani explains. “It doesn’t cover genuine payroll mistakes, so you won’t be criminally penalised if you’ve done something that’s a genuine payroll mistake. It’s where you know you’ve done something wrong over and over again, and continuously keep doing that, that can trigger criminal liability.”

Additionally, as of August 2025, employees gained the right to discuss pay, as changes to the Employment Relations (Employee Remuneration Disclosure) Amendment Act 2025, made pay secrecy clauses legally invalid. “Employees can raise a personal grievance if they’ve ever been mistreated or there’s been adverse action against them because they’ve discussed their own pay or their remuneration,” Ahmadzadeh Salmani says.

It Pays To Get Wage Calculations Right

The first major changes of the year come on 1 April when the adult Minimum Wage rises.

“$23.95 per hour is what the adult minimum wage will change to and the starting out wage will change to $19.16 per hour,” Ahmadzadeh Salmani outlines. Data from Employment Hero’s NZ customers put the median hourly wage at $35.60 for December.

Ahmadzadeh Salmani warns HR leads to be aware of a common compliance oversight where SMEs can inadvertently underpay salaried staff on fixed pay. “I suggest every year to look at all of your employees that are sitting on the minimum wage line. If they’re doing additional hours here and there, all of a sudden you’ve ticked them over and they’re actually earning less than the minimum wage because of the hours that they’re doing.”

Clearer Rules Are On The Cards For Managing Staff

A major part of the 2026 reforms focuses on rewriting the rules for managing staff performance and hiring contractors. The Employment Relations Amendment Bill, which is expected to pass within months, contains several proposed changes to procedural traps that can trip up smaller firms.

“Employees earning a base salary of $200,000 per annum are excluded from raising a personal grievance for unjustified dismissal,” says Ahmadzadeh Salmani. The reform would allow that employee and their employer to have a conversation instead. “In my experience, people earning salaries of this calibre usually prefer a frank conversation. They don’t like to be put through performance management processes, especially at the executive level. They just want to know what they can do.”

Equally significant is the stance on serious misconduct – such as theft, fraud or violence – designed to prevent ‘windfall’ payouts. “If an employee is found to have engaged in serious misconduct, they will not get any remedies at the employment relations level, at the Employment Relations Authority level, at the court level.”

The reform also scraps the controversial ’30-day rule’ that currently allows employees to bring unjustified dismissal claims even if they’re let go within their first month on the job – a change imposed to give employers more genuine flexibility during initial hiring periods.

And proposed changes to the Contractor Gateway test would provide greater certainty around whether a worker is an independent contractor or an employee, by introducing a new four-part test to be performed before the existing test. “There’s a lot that you have to have a look at and this will just simplify it,” Ahmadzadeh Salmani says.

New Approach Should Relieve Holiday Headache

The final pillar of the 2026 reform agenda is a proposed overhaul of the Holidays Act, designed to replace one of New Zealand’s most notoriously complex pieces of legislation with a more intuitive system. For years, SMEs have struggled with the administrative burden of calculating leave for staff with varying schedules, often leading to accidental underpayments and costly payroll audits.

“The biggest shift that we’re going to see is moving from weeks- to hours-based accrual,” Ahmadzadeh Salmani says, welcoming the change. “The legislation says four weeks entitlement but everybody works off hours. ‘Weeks’ is great for salaried workers but it’s not great for somebody that’s in hospitality, in construction, in all of the industries that basically are outside of the big corporates, which is most of New Zealand.”

Under the new model, leave will accrue at a flat rate of 0.0769 per hour worked, meaning an employee’s leave balance grows in direct proportion to their actual work. The Act also introduces ‘Day One’ accrual, allowing staff to access leave as soon as it is earned, and recognition of casual workers. “If that gets passed, then casual employees will be paid 12.5 per cent leave compensation and that will cover annual leave and sick leave as well,” Ahmadzadeh Salmani explains.

Set Yourself Up For A Smoother Year Ahead

With the holiday period behind them, New Zealand SMEs can now focus on ensuring their systems are equipped to handle the upcoming legislative shifts. Says Ahmadzadeh Salmani: “I really do think that these changes will help.”