Income threshold and unjustified dismissal claims: what’s changing
There has been plenty of discussion this year about the new income threshold for unjustified dismissal personal grievance claims that is being introduced by the Employment Relations Amendment Bill.
Now that the Select Committee has reported back, a broadening of the definition of income has been proposed, with the income cap shifting upwards to $200,000 per year (from the earlier $180,000 proposal).
What the Bill does
• Employees earning above the threshold will be prevented from bringing an unjustified dismissal claim (unless this is negotiated in their individual employment agreement).
Select Committee recommendations
“Remuneration” will be defined more broadly to include bonuses, commissions, and employee share scheme benefits, not just base salary. This aligns with PAYE income and reflects modern pay structures.
The threshold will increase from $180,000 to $200,000, to ensure the number of people captured by the threshold does not increase as a result of the widened definition of remuneration.
Annual remuneration will be calculated using a formula based on total income over the previous 52 weeks, pro-rated if needed.
Why this matters
Employees earning over $200,000 will no longer have an automatic right to bring an unjustified dismissal claim and employers will not necessarily need to go through length termination processes for higher-paid employees, unless their individual employment agreements state otherwise.
The Government’s intention is for this change to apply to all new employment agreements once it is passed into law. In the case of existing employees, there will be a 12 month grace period for employers and employees to renegotiate their agreements. If no changes are agreed, the new law will automatically apply to those employees who earn above the income threshold. Employers will need to understand the new calculation method and ensure contracts are clear on whether this protection applies.
The Bill is expected to pass in early 2026. If you’re unsure how these changes affect your business or your agreements, our team can help you review and prepare for what’s ahead.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.
