New Zealand’s Employment Relations Act is set to undergo significant reform, with new measures limiting unjustified dismissal claims for employees in high-paying roles. Workplace Relations and Safety Minister Brooke van Velden announced the upcoming changes as part of the ACT-National coalition's drive to increase workplace flexibility.

The policy, which will be introduced through the Employment Relations Amendment Bill in 2025, establishes an income threshold of NZ$180,000 (approximately US$106,130) per annum. Employees earning above this threshold will no longer be able to raise personal grievances related to unjustified dismissal unless specifically negotiated otherwise in their contracts. The threshold, which affects around 3.4% of the workforce, will be updated annually to reflect changes in average weekly earnings.

“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 changes are designed to foster greater autonomy for both parties in leadership and specialist roles, which are seen as critical to organisational success. Van Velden highlighted the significant impact that senior executives or technical specialists can have on workplace culture and performance.

“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 big flow-on effects on the entire business, increasing the risk of poor culture and low morale,” she explained.

The government believes this flexibility will help organisations secure the right fit for high-level positions, reducing risks associated with poor performance in critical roles.

The reform also presents an opportunity for employees seeking to advance their careers. By eliminating the risk of disruptive and costly dismissal processes, it encourages employers to take a chance on candidates for challenging roles, allowing them to gain experience in high-stakes positions.

“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.

While the policy aims to give employers greater latitude in managing their teams, it does not entirely eliminate dismissal protections. Employers and employees can negotiate terms to retain unjustified dismissal coverage if desired. This dual approach aims to balance the need for organisational flexibility with individual protections.

The new policy aligns with New Zealand’s top income tax rates and reflects a broader strategy to streamline workplace relations for highly compensated employees.

The Employment Relations Amendment Bill is expected to formalise these changes in 2025, signalling a significant shift in how high-impact roles are managed. For businesses, it represents an opportunity to make staffing decisions more freely; for employees, it provides a clearer path to leadership without the looming threat of employment disputes.