Equal Pay Act: How will the new changes affect NZ businesses?

Published 3 Jun 2025 | 2 min read

Pay equity has always been a balancing act.

Recognising the value of different work, ensuring fairness, and maintaining business sustainability. But recent changes to New Zealand’s Equal Pay Act have flipped the script for CEOs, managers, and HR teams.

As of 2025, employers must rethink how they handle pay equity claims, or risk legal and financial fallout.

With all current claims being discontinued and stricter criteria introduced, the pressure is on to understand the new rules... fast.

The old system let businesses drift into risky territory.

Since the 2020 amendments, pay equity claims could be raised broadly, sometimes without solid evidence.

Employers faced multi-employer bargaining and mounting costs, particularly in publicly funded sectors like health and education.

A lack of clarity on what counted as “undervalued” left many businesses second-guessing decisions or settling claims under uncertain legal ground.

For some, it became a compliance nightmare; for others, an unexpected financial burden.

Now the waters are stirring again, only this time, the tide’s coming in harder.

The Government has acknowledged that the Equal Pay Act was no longer fit for purpose. Minister Brooke van Velden confirmed the system was too vague, too expensive, and too open to loosely grounded claims.

More information on Hon Brooke van Velden's update.

The new legislation aims to restore confidence but also tightens the requirements.

The reset will demand a sharper focus from employers, especially when it comes to defining what counts as undervalued work and how claims should be managed going forward.

What’s changing (and what employers must act on):

• Higher threshold for female-dominated work: Must now be at least 70% female for 10 consecutive years (up from 60%).
• Stricter evidence requirements: Claims must prove historic and current undervaluation, not just allege it.
• Refined use of comparators: Clearer rules on how to compare male-dominated roles to determine equal value.
• Business sustainability recognised: Employers can phase in settlements to protect financial stability.
• Claims discontinued and review clauses unenforceable: All existing claims end immediately, new ones must meet fresh criteria.
• No new claims based on old standards: Claims can only be raised again after 10 years if they comply with new rules.

What this means for NZ businesses going forward

This overhaul proves one thing: the Government is serious about rooting pay equity in evidence, not assumption.

For employers, this is a chance to drive better internal practices and rebuild trust in the process.

But it also demands vigilance.

Knowing the exact thresholds, collecting data, and understanding job value comparisons are now critical HR responsibilities. For those who get ahead of it, the changes are manageable.

For those who ignore it, there’s risk ahead.