On 1 July 2016, the unfair dismissal high income threshold rose to $138,900 per annum. While this event comes as no surprise to anyone – the threshold is raised every year on the same date – it serves as a timely reminder for employers to consider their exposure before dismissing high income employees.
THE HIGH INCOME THRESHOLD EXPLAINED
Unless a high income employee is covered by a modern award or enterprise agreement, having an annual rate of earnings at or above the threshold will prevent them from successfully maintaining an unfair dismissal claim.
Generally speaking, it is a simple task to ascertain whether or not an employee’s income falls below the threshold, but confusion can still arise when determining what elements comprise income.
Usually, an employee’s income will include wages, voluntary contributions to superannuation in excess of compulsory and the agreed monetary value of non-pecuniary benefits (for example a company car). Not included in an employee’s income are statutory superannuation contributions, reimbursements, and all payments that cannot be determined in advance. This last element relates to commissions, irregular overtime and incentive based bonuses.
The Fair Work Commission (FWC) in Lesley Mallows v Touch Base Asia Pacific Pty Ltd t/a Touch Base Asia Pacific [2011] FWA 1695 has held that overtime and performance-based bonuses could not be included as part of the overall calculation of income because they could not be determined in advance and did not fit the description of ‘determinative income’ under the Fair Work Act 2009 (FWA) section 332(2)(a).
This new high income threshold is also relevant when the (FWC) awards compensation as the maximum amount that the FWC can award in an unfair dismissal claim is capped at the lesser of:
a) Six months’ pay; or
b) Half of the high income threshold which is currently $69,450.
IMPLICATIONS FOR EMPLOYERS
Employees should be aware that employees earning over the high income threshold have other ways to challenge their dismissal, for example an action for breach of contract, the general protections of the FWA, or under anti-discrimination laws.
Employers are urged to seek legal advice before dismissing a high income employee, to ensure that they are fully informed of potential challenges to the dismissal that may be commenced by the employee.
Please contact Michael Bishop, Amelita Hensman or Ben Drysdale with any queries relating to unfair dismissal or employment law.
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