Here are four of the changes worth paying close attention to:
1. Higher-income employees no longer have the usual unjustified dismissal protection
The Act now creates a different regime for employees whose annual remuneration meets or exceeds the specified remuneration threshold, currently $200,000.
When working out annual remuneration, the starting point is not just base salary. Bonuses, commission, PAYE-deducted payments, and share scheme benefits are also counted.
For those “High Earner” employees:
- They cannot bring a personal grievance for unjustified dismissal, or for unjustified disadvantage (if it relates to the dismissal); and
- An employer ending the employment will not have to follow the usual good faith dismissal obligations or provide written reasons for the decision.
That does not mean all good faith obligations disappear. Section 4 remains in the Act. What this means is, for employees captured by this threshold, the specific obligation to provide relevant information and an opportunity to comment before a termination decision is made no longer applies in the same way. The Act also removes the usual right to request reasons for dismissal in those cases.
The Act also allows an employer and employee to agree in writing that those provisions will not apply.
The change applies:
- Immediately to high earners employed from 21 February 2026.
- For existing high earners, there is a 12-month transition period, so the new regime will generally apply to them from 21 February 2027.
What does this mean in practice?
For high earners caught by the new regime, the usual unjustified dismissal framework falls away. In broad terms, an employer no longer must have a good reason for dismissal, follow the usual fair process, meet the information-and-comment limb of good faith, or provide written reasons if asked. That is a significant shift. But it is not a complete free pass: employers must still comply with the remaining good faith obligations and give the notice required by the employment agreement, or reasonable notice if the agreement is silent.
In practical terms, that makes it easier to end the employment of a covered high earner for underperformance, misconduct, medical incapacity, redundancy, or because the relationship is no longer the right fit. The dismissal may still be challenged, but not through the usual unjustified dismissal route. High earners generally cannot raise a personal grievance for unjustified dismissal, or for unjustified disadvantage where the disadvantage relates to the dismissal itself. They can, however, still raise other personal grievances.
The threshold position may also be less straightforward than it first appears. Annual remuneration is broader than base salary. It includes PAYE income paid by the employer, such as salary or wages, allowances, overtime, bonuses, cashed-up leave, back pay, lump-sum holiday pay, restrictive covenant payments, gratuities, and employee share scheme benefits. That means some employees may move above or below the threshold depending on variable remuneration such as bonuses or commission.
Broadly, the threshold is worked out by looking at the employee’s gross earnings over the 364 days before they are notified of dismissal, excluding the current pay period, and only counting pay earned while they were in the role they are being dismissed from. That figure is then annualised using the statutory formula.
This is likely to drive negotiation. Some high earners will want express contractual certainty, whether by agreeing to opt back into unjustified dismissal protections or by negotiating bespoke notice, process, or exit-payment provisions. The legislation expressly allows the parties to agree in writing that the remuneration threshold will not apply.
The likely result is not fewer disputes, but different ones. The battleground will shift. Where unjustified dismissal is off the table, expect closer scrutiny of employment agreement wording, bonus provisions, notice clauses, policy terms, and whether the employer has honoured its remaining contractual and statutory obligations. Other claims, including discrimination and non-dismissal grievances, will take on greater importance.
2. The Act now expressly excludes some contractors from the definition of “employee”
Section 6 now says that an employee excludes a “specified contractor”. A person will only fall into that category if the statutory criteria are met. Those are:
- A written agreement stating the person is an independent contractor or not an employee.
- No exclusivity restriction (although in practice the work for the company may be full-time).
- Either:
- A genuine freedom over when work is done; or
- A qualifying subcontracting right.
- No termination merely for declining additional work; and
- A reasonable opportunity to obtain independent advice before entering the arrangement.
While this is a major change, it does not wipe away the traditional employee-status analysis altogether. If the new gateway requirements are not met, the Authority or Court still must determine the real nature of the relationship under section 6. So, the old substance-over-label analysis is still there; the new exclusion simply sits ahead of it.
In practical terms: calling someone a contractor is still not enough. Businesses need to check whether the arrangement now meets the statutory criteria. If it does not, the usual analysis test is still very much alive.
3. Personal grievance remedies are now much more exposed to employee contribution
The remedies framework has also changed. The Act now provides that if an employee’s own action contributed to the situation giving rise to the grievance, and that action amounts to serious misconduct, the Authority or Court must not award any remedy.
If the employee’s conduct contributed but does not reach the “serious misconduct” threshold, reinstatement and compensation for hurt and humiliation are unavailable, and any remaining remedies may be reduced by up to 100%.
These changes are unlikely to reduce litigation. At least in the short term, they are more likely to shift the fight: expect more arguments, more complexity, and more cost as the ERA and Employment Court work through the boundaries of serious misconduct and the consequences that now flow from it. Employees facing serious misconduct allegations may also look to contractual claims as an additional route to recovery.
Now is the time to revisit disciplinary policies and misconduct clauses. Employers should make sure serious misconduct language is clear, up to date, and not weighed down by process promises that create unnecessary contractual risk. More broadly, employment agreements should be checked carefully to ensure they do not hand employees an easy breach of contract claim when employment ends.
4. The old 30-day collective agreement rule has effectively gone
The 30-day rule is gone again. From 21 February 2026, new employees covered by a collective agreement no longer default onto collective terms for their first 30 days.
They can choose from day one whether to join the union and be covered by the collective or sign an individual employment agreement.
Employers still need to provide the usual collective agreement and union information at the outset, so this is a change to default coverage, not to the obligation to inform.
The sensible next step is to review onboarding documents and agreement templates to make sure they no longer assume the old 30-day rule.
Final thoughts
These amendments do not just tweak the edges. They change the shape of some core employment law issues — who can challenge a dismissal, who may be treated as a contractor, what remedies remain available, and what happens when a new employee starts in a union-covered environment.
For employers, now is the time to review agreements and processes.
For employees and contractors, now is the time to understand which protections still apply, which have narrowed, and where contract wording may now matter more than it once did.
