Legislation introducing an "investment approach'' to welfare has been signed off by the Cabinet and will go before a select committee after its first reading in Parliament this month.
Social Development Minister Paula Bennett's Social Security (Benefit Categories and Work focus) Amendment Bill will reduce the number of benefit categories, make benefits more work-focused, introduce expectations for partners of beneficiaries and make beneficiaries prepare for work.
From October this year, sole parents will have to be available for part-time work when their youngest child reaches school-age, and when the youngest child turns 14 the parent must be available for full-time work.
The new benefit categories included in this bill are: jobseeker support for those actively seeking and available for work, sole parent support for sole parents with children under 14 years, and supported living payment for people significantly restricted by sickness, injury or disability.
Those currently on the sickness benefit will be included in jobseeker support, and will be assessed to determine whether they would have to look for part-time or full-time work.
Ms Bennett said jobseeker support will include those capable of work, and those who are temporarily exempt but will soon be able to work.
Ms Bennett says these changes will result in 135,000 people on jobseeker support.
A 12-month reapplication for the unemployment benefit will apply to all those on the new jobseeker benefit.
The changes will cost the Government $520 million and save the Government $400m a year.
Labour's Social Development spokeswoman Jacinda Ardern was critical of the welfare announcement.
"Once again we have Paula Bennett talking up what she says is the most comprehensive reform of the welfare system in decades.''
Ms Ardern said the announcement wasn't new.
She called it a "regurgitation of a raft of previously announced measures that in real terms will change little for people trying to find work.''
Ms Ardern said simplifying benefit categories was not enough to create a system that support people into work.
"It's time the Minister faced the big issues - job creation, skills and training, genuine efforts to assist people from wellness to work, and access to child care.''
But Prime Minister John Key said the new benefit categories would make it easier for people to understand.
"Underpinning these changes is our belief that by targeting the right support, to the right people, at the right time we can enable people to move off welfare and into work sooner. We believe those that can work should work.
"Establishing new benefit categories signals a fundamental change to the benefit system by increasing its work focus,'' said Mr Key.