New Zealand to limit unjustified dismissal claims for high-paid employees

Workplace Relations and Safety Minister, Brooke van Velden, has announced an upcoming change to New Zealand’s Employment Relations Act aimed at enhancing workplace flexibility for employers and employees in high-impact leadership and specialist roles. The new policy is set to introduce an income threshold that will limit the ability of employees in high-paying positions to raise personal grievances related to unjustified dismissal.

Under the new provisions, which are part of the ACT-National coalition’s commitment to reform, employees earning about NZ$180,000 (US$106,130) per annum will no longer be able to pursue an unjustified dismissal claim. This income threshold, expected to cover around 3.4% of the workforce, aligns with the country’s current top income tax rates and will be adjusted annually in line with increases in average weekly earnings.

Van Velden emphasised that the change is designed to give employees and employers more autonomy in negotiating contracts. “This policy is about offering employees and employers more choice when negotiating contracts,” said van Velden. “Employers and employees are free to opt back into unjustified dismissal protection if they choose to negotiate their own dismissal procedures that work for them.”

The policy is expected to benefit organisations in securing the best fit for high-level positions, which often have a significant impact on organisational performance and culture. “Highly paid employees such as senior executives or technical specialists can have a significant impact on organisational performance and culture. Having a poor-performing manager or executive can have a big flow-on effects on the entire business and increase the risk of poor culture and low morale,” she explained.

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The change also provides employees aspiring to progress in their careers with an opportunity to gain experience in more challenging roles without the risk of a costly and disruptive dismissal process. “Employees wanting to move up the career ladder and be considered for more challenging positions will benefit from this policy. It allows employers to give employees a go in these high-impact positions,” said van Velden.

The Employment Relations Amendment Bill, which will formalise the new policy, is expected to be introduced in 2025. The policy aims to strike a balance between providing employers with more flexibility in staffing decisions while ensuring employees still have protections when necessary.