Understanding the recent employment law changes affecting high-earning employees

The Employment Relations Amendment Act 2026 came into force on 21 February 2026, introducing changes that are a real shake-up for New Zealand employment law. These changes include:

• removing dismissal protections for employees earning $200,000 or more;  

• introducing a ‘specified contractors’ test;

• removing the 30-day collective agreement rule; and  

• restricting remedies for personal grievances.  

In this article, we focus on the removal of dismissal protections for employees earning $200,000 or more per annum (referred to as ‘high-earning employees’ in this article).  We’ll unpack what the change means, who it applies to, and what employers should be doing right now.

What’s changing for high-earning employees?

The law changes mean high-earning employees cannot bring a personal grievance in relation to their dismissal.  Under the new legislation, when dealing with the dismissal of a high-earning employee:

• Employers are not required to follow the usual good‑faith process of providing relevant information and giving the employee an opportunity to comment before dismissing them.

• Employers are not required to provide a written statement of reasons for dismissal, even if the employee requests one.

• High earning employees cannot bring a personal grievance for unjustified dismissal, or a claim for unjustifiable disadvantage if the grievance relates directly to their dismissal.

Who is a ‘high earning employee’?

The Act introduces a ‘specified remuneration threshold’ that has initially been set at $200,000 per annum and will be adjusted every year on 1 July. If an employee’s annual remuneration meets or exceeds the threshold at the time of their dismissal, the changes will apply (subject to a 12-month transition period for some employees as explained below), unless the parties have agreed otherwise in writing.  

When does this take effect?

The new legislation applies immediately for high earning employees who started with a new employer on or after 21 February 2026.

A 12-month transition period will apply to most existing employees, as explained below, allowing time for the parties to renegotiate the employee’s terms. This transition period began on 21 February 2026. During this transition period, existing high earning employees will still be able to raise a personal grievance in relation to their dismissal. If the parties don’t agree to any changes during the transition period, the new legislation will automatically apply from 21 February 2027.

If an existing employee accepts a new role with their employer that starts during the transition period, and their new remuneration meets or exceeds the threshold, the new legislation will apply when their new role starts, unless the high earner negotiates otherwise. This doesn’t apply if the employee changes roles because of a restructure – in this situation, they will continue to be protected by the transition period.

How is remuneration calculated?

Rather than relying on salary alone, remuneration is calculated by looking at what the employee was actually paid in the last 12 months. The Act provides a specific method for working out whether an employee meets the threshold. Remuneration includes PAYE income payments and benefits from employee share schemes, for example, salary, wages, allowances, bonuses, incentives, overtime, cashed-in annual leave, and equity‑based benefits will be considered in the calculation of remuneration. ACC‑related payments, superannuation payments, and things covered by fringe benefit tax won’t be included.

What rights remain unchanged?

High‑earning employees can still bring personal grievances for issues unrelated to their dismissal, for example, unjustifiable disadvantage not connected to their dismissal, discrimination, and sexual or racial harassment. This means employers should not treat high-earning employees as being outside employment law altogether - the restrictions are targeted and apply to dismissal‑related claims only.

Can employees and employers opt out of these changes?

Yes - if both parties agree in writing (as part of the employment agreement) that the relevant sections of the Act do not apply, then the employee will retain full rights to challenge their dismissal, and the employer must follow all standard procedural and good‑faith obligations, regardless of the employee’s remuneration.

Practical steps for employers

With these changes now in force, employers need to discuss and decide on their organisation’s approach and take practical steps to prepare. Our suggested steps include the following:

• Discuss and agree your organisation’s approach to the new law. For example:
  
  • How will your organisation approach negotiations with existing high-earning employees during the 12-month transition period? Will you have a ‘blanket’ approach for all employees, or take a case-by-case approach? What might you be open to negotiate on? Would you allow some/all high-earning employees to opt back into the current dismissal protections? Who will handle negotiations and what approval is required before agreement is reached?
  • How will you approach negotiations with new high-earning employees joining your organisation? Will you have a ‘blanket’ approach for all new starters, or take a case-by-case approach? What might you be willing to negotiate on? What approval is required before agreement is reached?
  • Will you communicate this change and what it means to your high-earning employees during the 12-month transition period?  

• Identify your existing high-earning employees, and who might cross the threshold in the foreseeable future.  

• Review your employment agreements and policies to determine what may need to change. Robust employment agreements will matter more than ever before, with new and existing employees wanting to be clear about the terms of their employment relationship and how it may end.  

• Prepare for negotiation with high-earning employees during the 12-month transition period. This negotiation could focus on ‘opting out’ of the new legislation, but could also focus on other protections, for example, longer notice periods, ‘no-fault’ termination clauses, increased redundancy compensation, or bespoke contractual termination process terms. Employers and employees need to act in good faith during this process, this means dealing with each other openly, honestly, and constructively, with a genuine intention to reach agreement. Any agreement reached will need to be clearly documented in writing.  

• Consider how these changes will affect your pay review cycles. Although pay increases are technically a change to terms of employment, in practice, many employers do not require employees to formally sign and agree to the change. This may need to change going forward where a pay increase pushes an employee’s remuneration over the threshold.  

While these changes give employers more flexibility, they also put greater emphasis on leadership, trust, and day-to-day decision-making. Taking the time to be clear about your approach will help ensure your practices are not only compliant but aligned with the kind of employer you want to be.

Please reach out to the team at Humankind if you have any questions about these changes and how they might be implemented in your organisation.  

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