From 1 July 2017, the high income threshold has increased to $142,000 per annum.
What is the significance of the high income threshold?
Under the Fair Work Act 2009 (FWA), an employee who is not covered by a modern award or enterprise agreement and whose ‘annual rate of earnings’ exceeds the high income threshold is ineligible to claim unfair dismissal.
What is an employee’s annual rate of earnings?
Whether or not an employee is above the high income threshold depends on what is termed employee’s ‘annual rate of earnings’.
The FWA defines the meaning of ‘earnings’ to include:
- the employee’s wages;
- any amounts applied on the employee’s behalf or as the employee directs (e.g. a salary sacrificing); and
- the agreed monetary value of non-monetary benefits (e.g. a company car).
Some items are excluded from the definition of ‘earnings’ under the FWA, including:
- payments which can’t be determined in advance, e.g. commissions on sales;
- incentive payments and bonuses;
- overtime (unless the overtime is guaranteed);
- reimbursements from the employee, e.g. meal allowances, motor vehicle allowances;
- employer contributions to a superannuation fund.
What is the maximum unfair dismissal compensation that can be ordered?
The Fair Work Commission can order compensation in an unfair dismissal matter to 6 months’ salary at the high income threshold, meaning that the new maximum amount is now $71,000 from 1 July 2017.