New Zealand’s employment law is undergoing its most significant transformation in some time through a series of changes, including the Employment Leave Act later this year. One impact from these reforms is remuneration. So far, remuneration changes include the prohibition on penalising employees who discuss their pay, and the removal of personal grievance protections for high-income earners. Together, they mean that remuneration is now more transparent, but also more consequential. Employers should be aware of the changes and their implications to avoid exposing themselves to unnecessary risk.
The End of Pay Secrecy
The Employment Relations (Employee Remuneration Disclosure) Amendment Act 2025 came into force on 27 August 2025. Its effect is that employees can now freely discuss their remuneration without fear of retaliation.
The Act creates a new personal grievance ground of “adverse conduct for a remuneration disclosure reason”. If an employer dismisses, disadvantages, or takes any negative action against an employee because they have discussed pay, that can amount to a personal grievance. The protection extends to employees who merely ask about a colleague’s pay or participate in a discussion someone else started. Whether employees will actually discuss pay more openly now will depend on contextual factors such as culture or personal relationships, as it is still a sensitive topic for many, but employers should be prepared for them to do so.
The Act doesn’t compel anyone to disclose their pay, and it doesn’t prohibit pay secrecy clauses in employment agreements. But any such clause is now effectively unenforceable and reliance on such a clause to discipline an employee may result in a grievance. This change in New Zealand has come after Australia, the UK, and Canada have made similar changes. The global direction indicates that pay transparency is moving from a “nice-to-have” to a protected choice for employees, although it falls short of a requirement to disclose pay.
For employers, there are also practical implications. Organisations should be equipped to clearly explain how pay is determined within their structure and be prepared to outline pathways for employee progression. We recommend auditing pay structures and addressing inconsistencies now, before employees begin comparing notes, which they are now empowered to do.
The $200,000 Threshold: High Earners Lose Dismissal Protections
The Employment Relations Amendment Act 2026 came into force on 21 February 2026. One of its provisions introduces a $200,000 remuneration threshold, above which employees lose the right to bring a personal grievance for unjustified dismissal. The rationale is that high-income employees have greater bargaining power — though in our experience, a $200,000 salary doesn’t always equate to sophisticated legal knowledge or genuine negotiating leverage.
The effect is significant. Employers are no longer required to comply with good faith obligations (under section 4(1A)(c) of the Employment Relations Act 2000) when dismissing these employees. And these employees can’t bring a personal grievance for unjustified dismissal or unjustified disadvantage if the ground “relates to the dismissal.” In practice this means they will be paid contractual notice only, with no reason given and no process required.
The threshold applies immediately to new employees hired after 21 February 2026. For existing employees, a 12-month transitional period applies until February 2027. After that, all high-income employees will be subject to the new restriction unless their employer agrees to opt out. The opt-out (a written agreement that sections 67I and 113A don’t apply) or other cushioning clauses are already becoming bargaining chips for senior hires.
Calculating Remuneration: A Trap for the Unwary
The threshold isn’t simply for anyone with a salary over $200,000. Annual remuneration is calculated using a statutory formula based on actual payments in the 364 days before notice of dismissal. This captures PAYE income, bonuses, commissions, and share scheme benefits, deliberately broadened at select committee stage regardless of pay structure.
Because the formula uses a rolling 364-day window, whether a bonus is counted depends on termination timing. An employee below the threshold under one window may exceed it under a slightly different one. For employers planning restructures, modelling which employees exceed the threshold at any given point will be an important factor to consider. There are still a number of unknowns in the calculation that will need be tested in the courts.
What This Doesn’t Change — And the Tension It Creates
This isn’t a blank cheque. High-income employees retain the right to raise personal grievances on other grounds such as discrimination, sexual harassment, whistleblower retaliation, and unjustified disadvantage unrelated to dismissal. Australia’s experience with a similar threshold indicates likely trends here: senior employees still pursue claims, they just reframe them. Discrimination, breach of contract, and privacy complaints have been popular vehicles of choice. We expect New Zealand will follow the same pattern.
These two reforms also create an intriguing tension. Employees can now freely discuss pay, which means the proximity of a colleague’s salary to the $200,000 threshold is no longer secret. Some employees will accept lower pay to preserve grievance rights. Others will negotiate opt-outs or other terms as a condition of engagement. Employers would also do well to weigh the flexibility of implementing dismissals for high earners against the reputational and retention costs of using it aggressively. Those who navigate this best will treat the threshold as a structural shift in risk allocation, not an invitation to cut corners.
What Employers Should Do Now
We would suggest the following as first priorities:
- Remove pay secrecy clauses from future agreements. Existing clauses are unenforceable. For high-income employees, address the threshold directly — including whether to offer opt-out or other protections.
- Audit pay structures. Unexplained gaps or inconsistencies in pay between peers may surface more easily now that employees can discuss pay freely. Proactive review of current remuneration will be easier than reactive damage control.
- Set up models for the threshold calculation. Understand how variable pay affects the formula. Timing matters, and getting it wrong could mean an employee isn’t above the threshold when you assumed they were.
- Maintain good process regardless. Dismissing without reason is lawful above the threshold. Dismissing without thought is still unwise as alternative claims remain available.
- Prepare for February 2027. The transitional period for high income earners expires then. Identify affected employees, consider opt-out or other cushioning clauses, and ensure senior agreements are fit for purpose.
Looking Ahead
The personal grievance landscape is changing. High-income employees will find new avenues to challenge unfair treatment, and all employees now have tools to look at whether they’re being paid fairly. The employers who thrive will be those who see these reforms as a reallocation of risk, not a relaxation of standards.
If you’d like to discuss how these changes affect your business, or if you need help reviewing your employment agreements and remuneration structures, we’re happy to help, please contact a member of our employment law team.
Special thanks to Partner Alastair Espie, and Senior Associate Hayley Coles for preparing this article.
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.
