Govt Tightens Equal Pay Act to Strengthen Pay Equity Claims Framework

The New Zealand Government is undertaking a significant overhaul of the Equal Pay Act in a move designed to create a more sustainable, robust, and clear framework for addressing pay equity issues. Workplace Relations and Safety Minister Brooke van Velden announced the amendments today, highlighting widespread concerns over the effectiveness of the current legislation and the financial burden it places on the Crown.

The Equal Pay Act, originally intended to ensure fair compensation between men and women performing work of equal value, has been found lacking in its practical application. Minister van Velden stated that the amendments introduced by the previous government in 2020 had unintentionally weakened the robustness of the process, allowing claims to proceed without adequate evidence and permitting overly broad applications of the law.

“It is clear the current Act is not working as intended,” said van Velden. “Claims have been able to progress without strong evidence of undervaluation and there have been very broad claims where it is difficult to tell whether differences in pay are due to sex-based discrimination or other factors.”

A More Structured, Evidence-Based System

The government’s new changes aim to address these flaws by introducing higher thresholds and clearer criteria for raising pay equity claims. Key among the proposed amendments is the requirement that roles must have been comprised of at least 70% female employees over the past ten consecutive years — an increase from the current 60% benchmark. This shift is intended to ensure that claims are grounded in longstanding gender imbalances.

In addition, claimants will now be required to provide reasonable evidence that the work in question is both historically and currently undervalued on the basis of sex-based discrimination. This replaces the more lenient standards under the current legislation, which critics argue have allowed speculative or poorly substantiated claims to proceed.

A more rigorous standard will also apply to the use of comparators — that is, male-dominated roles used to assess whether a female-dominated role is undervalued. The revised guidance clarifies that such comparisons must involve work that is not identical, but which shares similar skills, responsibilities, experience levels, and working conditions.

International Comparison and Fiscal Sustainability

Minister van Velden pointed out that New Zealand's approach to pay equity claims is markedly different from that of other developed countries. Uniquely, the Act allows employees and unions to initiate claims against multiple employers collectively, rather than solely targeting their own workplace. She noted that this model has led to claims affecting large public sector workforces, significantly increasing costs to the government.

“New Zealand’s pay equity regime is an outlier internationally,” she said. “The new and improved pay equity system will provide greater confidence that genuine pay equity issues will be correctly identified and addressed.”

According to government figures, the cost of settled pay equity claims now stands at approximately $1.78 billion per year, with the largest impacts felt in the public and publicly funded sectors. One such example includes the teachers’ pay equity claim, which affected around 94,000 workers.

“These changes will mean the pay equity claim process is workable and sustainable,” van Velden emphasized. “The changes I am proposing will significantly reduce costs to the Crown.”

Implications for Current and Future Claims

Under the new framework, all current claims will be discontinued. However, these claims may be re-submitted under the updated legislation if they meet the new criteria. In another key change, review clauses contained in existing settlements will no longer be enforceable. Nevertheless, previously settled claims may be re-raised a decade after their original resolution — provided they comply with the revised requirements.

Employers will also have greater flexibility to meet their obligations under the new law, including the ability to phase in settlements over time to minimize business disruption.

Legislative Process and Immediate Impact

The amendments are part of a new Bill introduced to Parliament today under urgency. Once passed and granted Royal assent, the changes will take effect immediately. The move to expedite the legislative process underscores the government’s urgency in establishing a more manageable and transparent pay equity system.

This legislative reform marks a pivotal step in rebalancing the goals of equity and economic sustainability. While it raises the bar for claimants, the government argues that the changes will ultimately lead to stronger, fairer, and more credible outcomes for all parties involved in the pay equity landscape.