Under changes to the Employment Relations Act, employees who earn $200,000 a year or more are unable to raise personal grievance claims related to dismissal.
Employers and high-income employees can contract back into dismissal protections or agree to their own dismissal procedures and severance terms.
The high-income threshold applies:
Immediately to all employees whose employment started after 21 February 2026.
From 21 February 2027, for employees on existing employment agreements.
During the 12-month transition period between 21 February 2026 and 20 February 2027, high-income employees on existing employment agreements can raise personal grievances related to dismissal, or re-negotiate the terms of their employment agreement - e.g. when moving into a new position (not due to restructuring) - and have the threshold apply early (removing the dismissal protections).
The change is part of the Employment Relations Amendment Act that also made changes to the scrutiny of employee conduct in personal grievance claims, and the remedies available to employees who contributed to a situation that gave rise to the grievance.
Under the new remuneration threshold, employees who earn $200,000 or more per year cannot raise a personal grievance claim for:
Unjustified dismissal.
Unjustified disadvantage that relates to dismissal (but not to other unjustified disadvantage grievance grounds).
High-income earners are still able to raise other personal grievance claims, e.g. for discrimination or sexual harassment.
Employers and high-income employees can negotiate to have standard dismissal protections apply or they can agree to personalised dismissal procedures and severance terms.
The government will review the high-income threshold every July and adjust it in response to any increase to average weekly earnings.
The threshold covers employee’s annual income, i.e. the PAYE income paid by the employer. This includes salary or wages, overtime, allowances, annual or special bonuses, tips, cashed-in annual leave and lump sum holiday pay, back pay, and employee share scheme benefits.
Annual income does not include ACC earnings (whether paid by the employer or ACC), superannuation payments (unless it is paid as salary or wages), or items covered by fringe benefit tax (e.g. motor vehicles available for private use, loans, free or discounted goods and services).
Income is determined on an annual basis and the threshold is not adjusted for part-time employment. So if, for example, an employee’s full-time equivalent salary is $205k per annum (over the threshold) but the person only works 30 hours a week, earning $153,750 pro rata (under the threshold), they will still be entitled to full dismissal protections.
The new rules apply from 21 February 2026 for some employees, and from 21 February 2027 for everyone else who earns over the high-income threshold. Once they apply, and unless the employment agreement says otherwise, employers won't have to meet all of the usual good faith obligations when dismissing a high-income employee. That means you will not be required to:
Have a good reason for dismissal.
Follow fair and reasonable process.
Give the employee information so they can understand the situation or ask for their feedback before making a decision.
Provide a written reason for the dismissal if the employee asks for it.
However, you must still give the employee the notice stated in their employment agreement (or give reasonable notice if it’s not in the agreement) and meet good faith obligations to be responsive and communicative, and not act in a misleading or deceptive way.
High-income earners will still be able to raise personal grievances for other reasons, so building solid employment relationships will be as important as ever. Employers will still have to ensure terminations of employees earning under the threshold are handled correctly, i.e. you have a good reason, follow fair process throughout, and act in good faith. Getting this wrong can open you up to the risk of successful personal grievance claims.
We recommend reviewing the employment agreements of all your current employees that earn more than the high-income threshold. You may choose to re-negotiate dismissal terms or have standard dismissal protections apply until after 21 February 2027.
Every new high-income employee joining your organisation can still negotiate for dismissal provisions to apply, so if you really don't want to agree to this, be prepared to offer other things that they want instead, e.g. termination payments, longer notice periods. Employees may also seek to structure their compensation packages so they fall below the income threshold.
If you need help understanding how these new rules apply to your business, or you need to create legally-robust employment agreements for all your employees, MyHR’s experienced ER team can help. MyHR’s powerful HR system is designed to deliver tailored documentation and expert guidance for organisations large and small.