What the new $200,000 dismissal threshold means for employers and employees
A significant change now applies to employees earning $200,000 or more per year. From 21 February 2026, these employees can no longer bring a personal grievance for unjustified dismissal in most situations. Here is what both employers and employees need to understand.
What Has Changed?
Under the new law, employees earning $200k+ are excluded from unjustified dismissal (and related disadvantage) personal grievance claims by default. Employers of these employees are also not required to follow the same good faith dismissal steps that apply to other staff, unless the employment agreement says otherwise.
How Is the $200,000 Threshold Calculated?
The threshold is not limited base salary. It includes bonuses, commissions, paid leave and equity compensation, calculated over a rolling 364-day period before the termination date. This means the timing of bonus or commission payments can affect whether the threshold is met in any given situation.
What About Existing Employees?
For employees on existing employment agreements earning above the threshold, there is a 12-month transition period. The new rule will not apply to them until February 2027, unless both parties agree to apply it sooner.
Can the Parties Opt Out?
Yes. Employers and employees can agree in writing to keep dismissal protections in place. If an employment agreement expressly includes those protections, the employee retains the right to raise a personal grievance for unjustified dismissal.
Practical Implications for Employers
If you employ someone whose total remuneration (including bonuses and other pay) is $200,000 or more, you have more flexibility and greater protection when ending that employment.
You are not required to follow the same dismissal process as for other staff, but acting in good faith and following a fair process remains good practice.
Be careful with remuneration calculations. The threshold is based on total pay, not just salary, and uses a rolling 364-day period.
For existing high earners, you have until February 2027 before the new rule automatically applies. Use this time to review and update agreements. Notice periods, termination clauses, and whether dismissal protections are preserved by existing employment agreements will be pivotal.
Consider whether you want to include an opt-in to dismissal protections in new senior employment agreements.
Practical Implications for Employees
If you earn $200,000 or more, you may no longer have the right to challenge your dismissal as unjustified in most circumstances.
This change does not remove other personal grievance rights, such as claims for discrimination, harassment, or other matters unrelated to dismissal.
If you are on an existing agreement, the rule does not apply to you until February 2027.
You and your employer can agree to keep dismissal protections in place..
Carefully consider, and contemplate seeking independent advice before signing any new employment agreement or variation to your current terms.
Please note: This article is intended as general information only and is not a substitute for legal advice. If you have questions about how these changes affect you or your business, contact the team at McLuskie Dalziel Lawyers.
