The high income threshold increases each financial year on 1 July, as determined by the Fair Work Commission (FWC).
Over the past few years, there has been a significant increase in the high income threshold, which has an impact on the availability of unfair dismissal remedy in the FWC for some employees. From 1 July 2019, the high income threshold will increase to $148,700.1
The high income threshold also determines the maximum compensation that can be awarded in unfair dismissal applications in the FWC. The maximum compensation that can be awarded by the FWC is capped at the equivalent of 6 months’ pay of the high income threshold, exactly half of the high income threshold amount. From 1 July 2019, the maximum compensation that can be awarded by the FWC in unfair dismissal proceedings will increase to $74,350.
If you are an employee with guaranteed earnings over the high income threshold (which is the gross payment), you are unable to bring a claim for unfair dismissal in the FWC. To determine an employee’s guaranteed earning, there are a number of items that are calculated to determine that figure. Pursuant to s.332 of the Fair Work Act 2009 (Cth), earnings include:
- Agreed value of non-monetary benefits; and
- Amounts or benefits prescribed by the Fair Work Regulations
Bonus payments or incentive payments do not form part of an employee’s guaranteed earnings.
The FWC have decided a number of cases that determine what additional benefits an employee receives that can be attributed to their annual earnings for the purpose of determining the high income threshold.
In Monteiro v Valco Group  FWC 2410, Commissioner Hunt determined, on appeal, that the employee’s earnings of $146,241.53 was over the high income threshold. The total amount calculated included a car allowance of $15,000. There were a number of additional benefits that were not calculated to form the employee’s earnings, but the inclusion of the car allowance in addition to the employee’s base rate salary pushed the income above the high income threshold and therefore his unfair dismissal claim was invalid.
To avoid ambiguity, employers can ensure that an employee’s total benefits and allowance received are quantified in the contract and clearly set out the salary includes, or excludes, certain allowances for the purposes of determining the guaranteed income.
In circumstances where there is no written contract in place, it is important for the employer to maintain accurate records of any benefits or allowances paid to the employee so as to assist in calculation of their annual salary. This would include recording the purpose of the allowance or benefit and whether it was used for the intended purpose by the employee.
With the increase to the high income threshold coming into effect from 1 July 2019, it is an opportune time for employers to clarify any ambiguity surrounding an employees guaranteed earnings.
PH Solicitor has extensive experience in Fair Work Commission cases. For further information or enquiries, please contact Paul or Julia on firstname.lastname@example.org or (03) 9642 0435.
1 The high income threshold rate will be published on the FWC website soon.