Posted on February 24, 2026
The Employment Relations Amendment Bill became law on 21 February 2026. It brings a series of changes that significantly impact the beginning and the end of the employment relationship. While these changes are controversial and ripe for repeal if there is a change of government in November, the changes employers can make now will continue to remain helpful regardless.
Starting with the new High Earner exception, over the next week we will bring you our guidance on the four big changes, and how employers can take the lead on their introduction.
| Change | When? | What do employers need to know? | What should employers do now? |
| An employee whose annual remuneration is more than $200,000 (“High Earner”) cannot bring a personal grievance for unjustified dismissal or unjustified disadvantage (if it relates to dismissal), unless they have agreed in writing the exception does not apply to them. Annual remuneration includes salary, bonuses, commission payments (i.e. any payment for which PAYE is deducted), and benefits under share schemes. If a High Earner’s employment is terminated, their employer will not have to meet their statutory obligations of good faith or provide a statement of reasons if requested. | The change is immediate for High Earners employed from 21 February 2026. Existing High Earners have until 21 February 2027 before the change takes effect for them. | Employers will no longer need a lawful reason or to follow a lawful process to terminate High Earners. It will be easier to end these employees’ employment for underperformance, misconduct, medical incapacity, redundancy, or simply just fit. An employee may slide above and below the High Earner threshold depending on conditional payments e.g. performance-based bonuses or commission earned on sales. The High Earner threshold, broadly, is calculated on annual remuneration paid for the 12 months prior to the employee being dismissed, with some exceptions for shares and shorter employment. High Earners (both existing and new) will try and negotiate changes to their employment agreements (IEAs) to provide certainty – either by opting back in to the personal grievance regime for unjustified dismissal or securing exit payments in certain termination situations. High Earners (and their lawyers!) will bring inventive claims related to dismissal. More breach of contract, discrimination, and disadvantage claims are likely. The ERA and Employment Court will strictly review IEAs and related policies to check an employer has met its contractual obligations if it terminates a High Earner. | Take the lead negotiating with existing High Earners. Does your organisation want to opt back in for High Earners? Does it want to create and offer ‘no fault termination’ clauses providing a ‘full and final’ payment in certain dismissal situations? Get advice now on options. Check and change existing employment agreements and policies to ensure they: • Do not undermine the High Earner exception. For example, do template IEAs/policies record a particular termination process must be followed? Do they require the employer to act in good faith when terminating? • Do not lend themselves too easily to a breach of contract claim. The new law includes formulas for calculating annual remuneration and the value of shares. Specialist employment and tax advice on how the formulas are applied is recommended. |
