The $200k trap: why your next promotion could strip your legal rights

If you are a senior executive in New Zealand, the safety net you have relied on for your entire career is about to be pulled out from under you.

For decades, the Employment Relations Act has been the great equaliser. Whether you were a junior admin or a CEO, you had the same fundamental protection: if your employer wanted to fire you, they had to prove they had a good reason and followed a fair process. If they didn’t, you had a “Personal Grievance” (PG) for unjustified dismissal.

That is changing. And if you earn over $200,000, you are the target.

The new Employment Relations Amendment Bill introduces a “High Income Threshold.” Originally proposed that this be a $180,000 base salary, recent Select Committee recommendations have pushed for a $200,000 threshold based on “total remuneration”.

This shift to “total remuneration” is the trap. You might have a base salary of $170,000 and feel safe. But add in your KiwiSaver, your vehicle allowance, your health insurance, and that potential performance bonus, and suddenly you breach the $200k mark.

The moment you cross that line, you lose the statutory right to claim unjustified dismissal.

In plain English? Your employer can potentially fire you without a substantive reason or a fair process, and the Employment Relations Authority cannot help you. You are effectively working “at will.”

The “trust me” danger

Many of my clients say: “It’s fine, Andy. I have a great relationship with the Board. They wouldn’t just fire me.”

But relationships change. Boards change. Private Equity firms buy companies and install new leadership. When that happens, your “good relationship” evaporates, and all that remains is the text in your employment agreement.

If that agreement is silent on dismissal protections, and you earn over $200k, you are exposed.

The fix: contract is king

The legislation does allow one crucial lifeline: the opt-in.

Employers and employees can agree to “contract back in” to the unjustified dismissal protections. But let’s be realistic – most employers won’t offer this voluntarily. Why would they give up the flexibility to fire a high-earner easily?

This is where strategic negotiation matters. If you are moving to a new role, or if your current employer is updating your contract for a salary review, you have leverage. You need to stop relying on the Act and start building your own safety net.

Here are the three clauses I am currently negotiating for my senior clients:

1. The “Contractual Just Cause” clause

We draft a specific clause stating the employer must still provide a valid reason and follow a fair process to terminate, mirroring the protections of the Act even if the Act no longer applies.

1. The “Golden Parachute” (liquidated damages)

If the employer refuses to give you dismissal protection, we trade it for cash. We insert a clause: “If the employer terminates without cause, a lump sum of six months’ salary is payable immediately.” This monetises your risk.

1. The Enhanced Notice Period

If they can fire you easily, you need runway. We push notice periods from the standard three months out to six or even nine months. This ensures that even if you are exited, you remain on the payroll long enough to find your next role.

The bottom line

The era of automatic protection for high earners is ending. If you are earning over $200k (or close to it), your employment agreement is no longer just a formality. It is the only thing standing between you and an immediate, unchallengeable exit.

Don’t sign the standard template.