Unfair dismissal high-income threshold set to increase up to $142,000

Employers should be aware that a greater number of employees will potentially have access to the unfair dismissal regime from 1 July 2017, when the high-income threshold is set to increase to $142,000.00.

This increase also affects the amount of compensation payable for an unfair dismissal claim, which is capped at the lesser of 6 months pay or half of the high-income threshold.

Therefore, with the increase on 1 July 2017, the maximum amount of compensation that can be awarded in an unfair dismissal matter is $71,000.00.

Are any employees precluded?

An employee who is not covered by a modern award or enterprise agreement and who earns over the high-income threshold is precluded from making an unfair dismissal claim.

What if the employee is covered by a modern award?

Even where an employee earns over the high-income threshold, if they are covered by a modern award, they may still be protected from unfair dismissal because the protection relates to the award coverage.

What does this mean?

This means that a high-income employee is potentially able to achieve the maximum amount of compensation, namely $71,000.00, in the event of a successful unfair dismissal claim.

Which types of earnings are included in the high-income threshold?

Earnings which are included in the high-income threshold are:

• wages
• the agreed monetary value of non-monetary benefits (such as extra superannuation)
• amounts dealt with on the employee’s behalf (such as a salary sacrifice arrangement).

Which types of earnings are NOT included in the high-income threshold?

Earnings that are not included are amounts which are unable to be determined in advance (such as a bonus) or allowances paid to employees that are not used for work-related expenses.

Whether or not amounts are included for the purposes of the high-income threshold is often the subject of dispute. We recommend employers exercise caution when considering whether payments made to employees count toward the threshold.

Common mistakes made by employers

Employers have been caught out previously by:

1. making an assumption that all amounts paid to an employee will count toward the threshold; or
2. by thinking that a senior employee paid over the high-income threshold is automatically excluded from making an unfair dismissal claim.

Prevention is key

For further information on the effect of this increase on your business, please contact us on 1300 565 846 or email info@ablawyers.com.au.