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The introduction of a high-income threshold under the Employment Relations Amendment Act 2026 represents a fundamental shift in how dismissal is assessed under New Zealand employment law.
Employees earning above the statutory threshold (currently set at $200,000 per annum) are now excluded from bringing a personal grievance for unjustified dismissal, or for unjustified disadvantage arising from that dismissal.
Practical Effect on Dismissal
For employees who meet the threshold, employers are no longer required to demonstrate that a dismissal was substantively or procedurally justified. They also are not bound by the usual good faith obligations that attach to dismissal processes under the Employment Relations Act.
How the Threshold is Calculated
Whether an employee exceeds the $200,000 threshold is not solely assess by reference to their base salary. Instead, it is calculated by reference to what they were actually paid in the last 364 days before their dismissal.
This may include:
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Bonuses and incentive payments
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Commissions
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Share‑based remuneration or equity schemes
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Other financial benefits paid during that period
This broader calculation means some employees earning below $200,000 in base salary may still fall within the high‑income category.
Additional Considerations
Before seeking to rely on the new threshold regime, employers should be aware of several important qualifications:
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For employment relationships that existed before 21 February 2026, there is a 12-month transition period before the threshold applies.
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If the employment relationship commenced after 21 February 2026, then the threshold applies immediately.
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Parties can agree to “opt out” of the high-income threshold.
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Employees are still entitled to raise a personal grievance on other grounds such as discrimination or sexual harassment.
Key Takeaways
The reform therefore shifts the focus from statutory protection to contractual terms. High-income employees must now rely on the express provisions of their employment agreements. In particular, contractual negotiations will look to provide more certainty for an employee by extending notice periods or imposing agreed upon dispute resolution mechanisms.
Employers should proactively review and update employment agreements for senior and high-income employees to ensure termination provisions reflect organisational intent and manage risk. Internal policies should also be refreshed to support consistent, defensible decision making, with early legal input and careful contract design now more important than ever.
