Cat Moody, a Principal Consultant at MartinJenkins, and Laila Harré, an Associate of the firm, look at a part of the water reform process that's critical but often overlooked.
When people talk about water reform, the conversation usually centres on pipes, assets, and debt. But there’s another story – one that rarely makes the headlines but that’s a critical part of the process: the transition of council employees to new water organisations.
This isn’t just a technical exercise. It’s a human challenge, and it’s one that carries significant financial, operational, and reputational risks. Councils and water entities that overlook this aspect risk missing opportunities for a smooth and cost-effective transition.
The shift no-one is talking about
Under the previous Three Waters reforms, staff had strong statutory protections and automatic transfer rights, balanced by the overriding of redundancy entitlements for those transferring. This time, the Local Government (Water Services) Act 2025 changes all that. Employment continuity now depends on two things: the water organisation making an offer, and the employee accepting it. There’s no automatic right to transfer.
Councils retain all employment liabilities – including redundancy obligations – for staff who don’t receive or, with a limited statutory exception, don’t accept offers. Many staff who do transfer may also be entitled to redundancy compensation. The Act provides only three substantive employment provisions: a limited redundancy exemption, continuity of employment where certain employees accept a role, and a requirement for councils to create two employee lists. Everything else relies on the Employment Relations Act, the Holidays Act, the Local Government Act and carefully drafted transfer agreements.
This is a fundamentally different risk profile from previous reforms – and many councils may be unaware of the change in approach under the Act, which requires councils and the water organisation to work constructively together throughout the process.
Why this matters
The risks aren’t theoretical: they’re real and potentially costly.
Missteps in consultation can lead to grievances that neither party wants. Multiple councils mean multiple individual and collective agreements, with different terms and conditions, creating a lot of complexity and, potentially, industrial instability.
Gaps in transfer agreements are a recipe for disputes over who pays what and when.
Add to that the risk of premature restructuring by water organisations and the consequences of excluding unions from planning, and you have a perfect storm of legal, financial, and reputational challenges.
What good looks like
The organisations that manage this best will treat the employment transition as a strategic priority, not an administrative task. They’ll invest early in planning, engage with employees and unions proactively, and ensure that transfer agreements are watertight.
That means:
- clearly identifying and allocating employment liabilities
- consulting transparently, and considering the feedback
- recognising service continuity and accrued entitlements, subject to legislative and employment-agreement constraints
- harmonising terms and conditions across multi-council workforces, and
- budgeting adequately for the costs of redundancies and harmonisation.
Where to start
If you’re at the beginning of this process, start by asking:
- Do we have the right governance in place for the employment transition?
- Have we got a plan to engage employees and their representatives?
- Do we understand our redundancy exposure across all the different employee categories?
- Are our transfer agreements specific and watertight, or are we relying on generic templates that create exposure to risk?
These aren’t just compliance questions – they’re strategic ones. Getting them wrong could mean delays, disputes, and unbudgeted costs.
The bottom line
Water reform is about more than infrastructure – it’s about the people.
Councils and water organisations that invest in proper employment advice and carefully drafted agreements will set themselves up for success.
MartinJenkins has an established reputation in employment and industrial relations, as well as significant experience establishing new organisations and managing change. We would welcome the opportunity to discuss how to manage a successful people transition between councils and new water organisations.
