The State Services Commission will investigate bullying claims against Retirement Commissioner Diane Maxwell, who has been stood down while an investigation takes place.
Prime Minister Jacinda Ardern said the commission's investigation was the "appropriate vehicle" for assessing the allegations.
Earlier today, Newsroom revealed Maxwell had been asked to immediately take leave while the SSC conducts an inquiry.
This followed claims that more than a dozen former staff at the Commission for Financial Capability had raised concerns about a bullying culture and mismanagement led by Maxwell.
Allegations include that she publicly shamed employees and tore up work in front of them.
Maxwell has denied the allegations.
Commerce and Consumer Affairs Minister Kris Faafoi confirmed he had directed the State Services Commission to open an investigation given the nature of the concerns.
He had asked the Commissioner to take leave while the investigation took place.
"Given that this Government is very clear on the need for workplaces to be safe and appropriate, I have directed SSC to open an investigation.
"This will ensure any current or former staff members are able to come forward, and will allow the Commissioner an appropriate opportunity to respond to the allegations.
"I have asked the Retirement Commissioner to take leave while SSC undertakes this work, and MBIE and the SSC will support the Commission and its staff to ensure continuity. SSC will report to me on findings early next year."
Ardern this afternoon told media it was now a matter for the SSC.
"We need to make sure all work places deal with allegations appropriately, in the case as I understand it the SSC is looking into this issue and that sounds like an appropriate vehicle for that."
The SSC's move comes as National MP Maggie Barry has also been accused of bullying staff.
The Weekend Herald revealed Barry had been twice investigated over bullying claims this year – including accusations she expected staff to do political party work on taxpayer time, which would be unlawful.
When questioned, Barry said Parliamentary Service had looked into allegations from former staff.
"The allegations were vigorously denied and disputed and were thoroughly investigated by Parliamentary Service. There was no finding that bullying or harassment had occurred."
Speaker of the House Trevor Mallard last week launched an independent review into bullying and harassment at Parliament.
While the review had been planned for some time, it has been given renewed impetus following the sexual assault scandal surrounding Russell McVeigh, allegations of bullying behaviour against Botany MP Jami-Lee Ross - who denies acting improperly - and Dame Laura Cox's report into bullying and harassment in the UK's House of Commons.