This means that incentive-based bonuses and non-guaranteed overtime rates cannot be taken into account. If there is no â
Unfair dismissal income cap increases to $136,700 By Lisa Anaf, Partner and Diana Diaz, Senior Associate
As of 1 July 2015, the high income threshold for the purposes of unfair dismissal applications under the Fair Work Act 2009 (the Act) increased to $136,700 per annum.
How does it work? If an employee is not covered by a modern award or an enterprise agreement, then they can only bring an unfair dismissal claim if they have an annual rate of earnings below the high income threshold. If an employee cannot bring an unfair dismissal claim, it means that terminations do not need to be procedurally fair, employers do not need a valid reason for the termination, and redundancies do not need to meet the “genuine redundancy” test in the Act. This does not mean employers have free reign to terminate as they wish. If an employee is award/agreement-free and earns over the high income threshold, employers will still need to make sure that a termination is not for an unlawful reason, and that the termination complies with the terms of the employment contract and any applicable HR policies.
What counts towards an employee’s “earnings”? An employee’s “earnings” include: •
wages;
•
amounts dealt with on the employee’s behalf or as the employee directs; and
•
the agreed monetary value of non-monetary benefits.
“Earnings” do not include amounts that cannot be determined in advance. This means that incentive-based bonuses and non-guaranteed overtime rates cannot be taken into account. If there is no “agreed” amount for non-monetary items then the Fair Work Commission can estimate a real or notional value. The list below sets out some examples of benefits that have and have not been accepted as contributing to an employee’s “earnings”: Earnings
Not Earnings
• Base Salary
• Discretionary or incentive-based bonuses
• Superannuation contributions over and above the minimum required by law
• Minimum superannuation contributions (currently 9.5%)
• Guaranteed overtime
• Non-guaranteed overtime
• Fringe benefit tax paid by an employer in a genuine salary sacrifice situation when an employee has forgone wages in return for a benefit
• Fringe benefits tax paid by the employer where the employer is free to choose whether to provide a particular benefit to an employee.
• The private use of a fully maintained company car
• Annual travel allowance for the use of a private car for work purposes
• The private use of a work phone or tablet/laptop • Tax-deductible work-related expenses
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Contact us For further information about this article or any workplace related issue, please contact: Lisa Anaf Partner T: +61 3 9605 0857 E:
[email protected]
Ross Levin Partner T: +61 3 9605 0070 E:
[email protected]
Malcolm Davis Partner T: +61 2 8035 7932 E:
[email protected]
Adam Lunn Partner T: +61 3 9605 0868 E:
[email protected]
Clayton Payne Special Counsel T: +61 7 3228 0457 E:
[email protected]
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