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A union leader has berated the Government for selling the "fundamental rights" of workers in order to convince Hollywood studio Warner Bros to keep the filming of The Hobbit in New Zealand.

A deal between Warner Bros executives and Government ministers was confirmed last night after two days of negotiations.

The Government has agreed to up to $34 million in tax breaks and help with marketing costs and an urgent change to labour laws.

The legislative changes will apply to the film industry - not just to The Hobbit movies - and will ensure that film workers hired as contractors will not be able to later argue in court that they were employees.

Mr Key said the change would give film workers certainty on their employment status from the moment they were hired.

The amending legislation will be introduced to Parliament today under urgency and already has the support of the Act and United Future parties, which is enough to ensure its passage into law.

But Council of Trade Unions President Helen Kelly told National Radio this morning the changes were unnecessary and "opportunistic".

She said under the current law it was already clear whether someone was an independent contractor or an employee.

"The current law says that if you are employed as an independent contractor in any industry, the court can look through that contract and see whether if it is genuine - whether there are reasons for it, you're a company, you're trading in other places, you've got control over your work, you're pretty autonomous over how you do it - or whether you are actually an employee - you turn up every day, you work under instruction, you don't work for anyone else and you don't run any sort of company [or] provide your own equipment, if it looks like you are actually an employee - it can deem you one.

"And then employment rights flow - sick leave, holiday, those sorts of things," Ms Kelly said.

"In this case you could be a clerical worker at South Pacific Films, for example, or at Wingnut Studios, and be deemed an independent contractor, denied all your employment rights and not be able to challenge that."

Mr Key said the changes were the "critical" issue for Warner Bros.

The Government might consider broadening the changes to include other performers such as television industry workers.

Labour MP Trevor Mallard said he was "exceptionally happy" that The Hobbit was staying in New Zealand, but it was dangerous to change laws simply because a foreign company demanded it.

He said Labour would most likely vote against the proposed changes.

Mr Key said the Government did what was necessary to save the films.

"It was a commercial reality that without this [law] change, these movies would not be made in New Zealand."

Ms Kelly told Radio New Zealand this morning the Government had a track record of favouring reducing work rights.

"The Government is doing nothing about the 250,000 unemployed in this country. We don't see any other schemes to provide work for them, but they are very happy to attack work rights that are fundamental."

Costs of The Hobbit

The deal will keep the $670 million project in New Zealand, creating thousands of jobs as well as tourism opportunities and international exposure.

New Zealand also secured one of the world premieres of the movies, and Sir Peter Jackson will work on material promoting this country as a tourism destination that will be included in all DVDs and digital products for The Hobbit, expected to reach an international audience of tens of millions.

In return, the Government will offset the films' marketing costs by US$10 million ($13.4 million) and pay up to US$7.5 million ($10 million) in extra tax breaks for each of the two movies, subject to their success.

That would bring the total cost to the Government, including tax rebates and the marketing credit, to just under $100 million, but Mr Key said it made financial sense because of the marketing opportunities for New Zealand tourism.

The changes to tax rebates will apply to all large film projects.

"There was some expenditure that didn't qualify under the old scheme," Mr Key said.

"We've looked to broaden that out. It puts us in line with other countries that have a broader definition of qualifying expenditure."

The Prime Minister said he could not go into details because of commercial confidentiality.

Green Party co-leader Russel Norman said Warner Bros was always looking for more money.

"John Key is selling out ... just to meet the demands of a multinational corporation."

But Dr Norman said he was very happy The Hobbit was staying in New Zealand.

A source close to the negotiations told the Herald that the talks had been "tough" and that Mr Key's earlier estimates of a 50/50 chance of success were not exaggerated.

While the high New Zealand dollar - which has risen from 65 US cents to 75 US cents in the past few months and from 50 US cents a couple of years ago - was a factor, Warner Bros had been prepared to cope with it until unions instituted an international actors' boycott.

Only then did the Hollywood company seriously consider other destinations, the source said.

When negotiations began this week, Warner Bros made it clear that the main issue was employment law and the status of employees and independent contractors.

Once that issue looked likely to be resolved, the discussions turned to money, the source said.

Mr Key said Warner Bros had asked for a lot more money than was provided in the final memorandum of understanding, and tax incentives in other countries were still far more attractive than in New Zealand.

But Warner Bros - subject to the labour laws changing - ultimately still wanted to make the movies in New Zealand with Sir Peter at the helm.