This increase also meant the compensation cap for unfair dismissals has increased to $68,350. Although employees who earn over the threshold can be excluded from modern award coverage, the National Employment Standards still apply to them.
It is especially important for employers who are currently managing the performance of a high earning employee and thinking of dismissing them, as any employee who earns above $133,000 and under $136,700 will now be covered by unfair dismissal laws.
The high income threshold for unfair dismissals refers to the highest possible income an employee could have, unless they are covered by an award or enterprise agreement, before they are excluded from making an unfair dismissal claim against their employer.
This threshold applies under the Fair Work Act 2009 and changes every year on July 1st. The following indicates how much the threshold has increased every year:
- 2009 - $108,300
- 2010 - $113,800
- 2011 - $118,100
- 2012 - $123,300
- 2013 - $129,300
- 2014 - $133,000
- 2015 - $136,700 (current)
If an employee claiming unfair dismissal is not covered by an award or enterprise agreement, and was earning greater than the high income threshold at the time of dismissal, then the employer may have a defence as to jurisdiction to the claim, although any defence still needs to be heard and contended in front of a representative of the Fair Work Commission.
The threshold relates to an employee’s annual earnings. It incorporates the employees’ wages, salary sacrifices, and non-monetary benefits like company cars and fringe benefits tax. It does not include allowances for living away. It is generally pretty straightforward working out an employee’s annual rate of earnings, however if an employee receives bonuses, overtime and salary sacrifices it can become more complicated.
In any unfair dismissal claim, it is important to figure out whether the employees claim is beyond the unfair dismissal jurisdiction and therefore disqualified.
The high income threshold level rises every year, enabling more and more employees to access the unfair dismissal provisions.
It is important for employers to be aware that employees that earn over the threshold may be unable to lodge an unfair dismissal claim may still have other ways to challenge their dismissal.
Before dismissing a high income employee it is always beneficial to seek professional guidance to ensure you are safe guarded against any challenge.
