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Increases to high income threshold, maximum compensation and minimum wage
Unfair dismissal high income threshold
The Fair Work Act 2009 (Cth) (Act) protects certain employees from unfair dismissal, if at least 1 of the following applies:
- the employee is covered by a modern award;
- an enterprise agreement applies to the employee in relation to his or her employment;
- the employee's annual rate of earnings is less than the high income threshold,
The minimum employment period is:
- 1 year — where the employer employs less than 15 employees; or
- 6 months — where the employer employs 15 or more employees.
On 1 July 2016, the high income threshold increased from $136,700 to $138,900.
It is important to consider whether an employee is protected from unfair dismissal. For example, an employee whose annual rate of earnings is $138,900 and who is not covered by a modern award or enterprise agreement, is not protected from unfair dismissal.
Determining an employee's annual rate of earnings
To work out whether an employee's annual rate of earnings is less than the high income threshold, employers need to consider what amounts make up an employee's annual rate of earnings. It includes, but is not limited to:
- wages;
- voluntary superannuation contributions; and
- the agreed value of non-monetary benefits such as a car or mobile phone.
An employee's annual rate of earnings does not, however, include:
- statutory superannuation contributions;
- reimbursements; or
- payments for an amount which cannot be determined in advance.
For the purposes of unfair dismissal, when is an employee's annual rate of earnings calculated?
In Brown v Pentana Solutions P/L[1], the Fair Work Commission (FWC) recently confirmed that an employee's annual rate of earnings is assessed at the time of the employee's dismissal.
In this case, the employee was paid in US dollars. In argument regarding the employee's earnings:
- the employee applied the exchange rate as at each date he was paid over the 12 month period immediately prior to his dismissal (this resulted in his earnings falling below the high income threshold); and
- the employer applied the exchange rate at the date of dismissal.
Commissioner Bissett confirmed the FWC's position that an employee's earnings is assessed at the time of dismissal and not over the 12 months prior to termination.
Maximum compensation for unfair dismissal
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