Unfair dismissal and the high income threshold
In this article our employment team provides details on the high income threshold that increased from 1 July this year. The increase highlights the importance of closely reviewing and assessing what the employee’s actual earnings are when faced with a claim for unfair dismissal.
The opportunity for a terminated employee to make an unfair dismissal claim is not available to all employees. It is not available to those who:
- Receive a remuneration package which is above the high income threshold; or
- Receive a remuneration package which is above the high income threshold and are not covered by an award or enterprise agreement.
From 1 July this year the high income threshold was increased from $129,300 to $133,000. Award employees earning more than this amount, could typically include senior IT professionals, engineers, some allied medical professionals and senior manufacturing staff.
When determining what is considered to be ‘earnings’ for the purpose of the high income threshold the following payments should be taken into account:
- The employee’s wages;
- Any additional amount applied or dealt with in any way on the employee’s behalf, for example salary sacrifice; and
- The value of non monetary benefits that the employee receives, such as the use of a company laptop, phone, or car.
Payments which will not be considered to be earnings under the high income threshold include:
- Payments which cannot be determined in advance;
- Reimbursements for business expenses; and
- Super contributions as prescribed by a law of the Commonwealth, state or territory.
Payments which are not to be considered earnings for the purpose of the high income threshold are generally self explanatory with the exception of ‘payment which cannot be determined in advance’. The Fair Work Commission looked at this very issue last year in Foster v CBI Constructions Pty Ltd in relation to overtime payments.
In Foster the Commissioner, with the support of the Full Bench upon appeal, held that earnings do not include overtime payments unless the payment of overtime was guaranteed, anticipated or agreed to in advance.
In Mr Foster’s case the overtime earned was in fact a payment that could be determined in advance as Mr Foster was subject to an ongoing direction by his employer to attend a mandatory safety meeting before commencing work every morning. The direction to attend an ongoing mandatory meeting was held to be distinguishable from overtime which is “sporadic” and “indeterminate”.
The case highlights the importance of closely reviewing and assessing what the employee’s actual earnings are when faced with a claim for unfair dismissal. If employees are working regular overtime, as in the case of Foster, or receiving additional non-monetary benefits this may have the effect of excluding them from the unfair dismissal regime if it pushes their earnings above the high income threshold.
The importance of understanding which employees fall under the unfair dismissal regime means that you will have greater discretion in the performance management of employees who do not have access to the regime.