Unfair dis­missal and the high income threshold

In Brief

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 régime if it push­es their earn­ings above the high income threshold.

The impor­tance of under­stand­ing which employ­ees fall under the unfair dis­missal régime means that you will have greater dis­cre­tion in the per­for­mance man­age­ment of employ­ees who do not have access to the régime.