Dismissal Rules For High Income Earners

Published 24 June 2026 | 5 min read

There are different rules for employers to follow when they dismiss an employee who earns over the remuneration threshold ($200,000 or more a year). There are also rules around when these employees can raise a personal grievance.

Usually, employers must follow a fair and reasonable process when they dismiss an employee. If an employer does not do this, the employee can raise a personal grievance against them.

These rules protect the employee from being unfairly dismissed. They are called ‘dismissal protections’.

However, if the employee earns $200,000 or more a year, they do not have certain dismissal protections.

Dismissal protections high income earners do not have

When an employer dismisses an employee who earns $200,000 or more a year:

• the employer does not have to follow a fair process (but they can choose to if they want to)
• the employer does not have to have a good reason for dismissal
• the employer does not have to meet the third key principle of the good faith obligations, to:
  • give the employee information so they can understand the situation, and
  • give the employee an opportunity to comment before making a decision
• the employer does not have to provide a written reason for the dismissal if the employee asks for it, and
• the employee cannot raise a personal grievance, except in some circumstances.

The only way an employee can keep these dismissal protections is if the employee and the employer agree to opt back in.

Employers must follow all other dismissal rules

Employers must still follow all the other rules for dismissal, which are to:

• meet the first and second key principles of the good faith obligations:
  • all parties must not act in a misleading or deceptive way, and
  • all parties must be responsive and communicative, and
• give the employee:
  • the notice stated in their employment agreement (unless they are being dismissed for serious misconduct), or
  • a reasonable period of notice if the agreement does not state a notice period.

Personal grievances for high income earners

In most cases, employees who earn $200,000 or more a year cannot raise a personal grievance if they believe they were:

• unjustifiably dismissed, or
• unjustifiably disadvantaged in their employment and it relates to dismissal.

They can still raise a personal grievance for any other reason listed on the ‘Personal grievances’ page.

During the 12-month transition period

This change came into law on 21 February 2026.

There is a 12-month transition period for this change.

During the transition period, the employee can still raise a personal grievance for these reasons if:

• at the time they were dismissed they either:
  • are in the same job that they were in immediately before 21 February 2026, or
  • are in a different job because of a restructure (with the same employer or a different employer), and
• they were dismissed before 21 February 2027, and
• they raise a personal grievance for these reasons within 90 days of the dismissal date.

Once the transition period ends, employees cannot raise a personal grievance for these reasons. The exception to this is if they agree in writing with their employer to opt back in to dismissal protections.

Renegotiating employment terms

The transition period gives the employee and employer time to renegotiate terms in the employment agreement. This is not the same as opting back in to dismissal protections.

If terms are renegotiated, these terms will:

• take effect from when it’s agreed, and
• continue to take effect once the transition period ends.

There are many terms the employee and employer could agree to. Both parties should seek legal advice before renegotiating terms in the employment agreement.

If it's agreed that the change starts earlier

Employers and employees can agree in writing that this change can start before 21 February 2027. If so, employees will not be able to raise a personal grievance for these reasons from the date it’s agreed.

What counts as income for the remuneration threshold

Annual income is PAYE income paid by the employer, which includes:

• salary or wages
• an allowance
• overtime
• annual or special bonuses
• cashed in annual leave
• payments for accepting restrictive covenants
• gratuities (tips)
• back pay, including back paid holiday pay
• lump sum holiday pay
• employee share scheme benefits.

Income not included

Annual income paid by the employer does not include:

• accident compensation earnings, whether paid by the employer or ACC
• employer superannuation payments, unless it is paid as salary and wages
• certain types of reimbursements
• things covered by fringe benefit tax, for example:
• motor vehicles available for private use
• low interest/interest-free loans
• free, subsidised or discounted goods and services.

How to calculate annual remuneration

To calculate an employee's annual remuneration to check if it is over $200,000:

1. add the employee's gross earnings over the last 364 days from the day they were notified of the dismissal
   • do not include the current pay period - calculate the pay leading up to the day before the start of the current pay period
   • only add the pay for the time the employee was in the position they have been dismissed from
2. divide that figure by the number of days the employee held that position during the 364 days (for the same period as step 1), and
3. multiply the outcome by 364 to get an annual amount.

Annual remuneration is reviewed each year

The remuneration threshold will be reviewed in July each year. It's reviewed based on the average ordinary weekly earnings (AOWE) for the first quarter of the year (January to March). This is the AOWE as reported in the Quarterly Employment Survey.

The remuneration threshold will only change if the AOWE increases.

Opting back in to dismissal protections

To opt back in to the dismissal protections that high income earners do not have:

• the employer and employee must agree
• it must be written as a term of employment that’s part of the employment agreement, and
• the term of employment must state that the annual remuneration threshold does not apply.

The details of the rules that do not apply are covered in the Employment Relations Act 2000:

If it’s agreed to opt back in to the dismissal protections high earners do not have, all of them must be opted into.

What happens if you opt back in

If the employer and employee agree to opt back in, the employer will have to follow all the rules for a fair and reasonable process for dismissal.

The employee will also be able to raise a personal grievance for all the same reasons as any other employee. This includes raising one for unjustified dismissal and unjustified disadvantage relating to dismissal.