High-Income Threshold to Increase
The Fair Work Commission recently announced the upcoming increase to the high-income threshold for the Financial Year 20/21. As of 1 July 2020, the threshold will be increased from $148,700 to $153,600 (a $4,900 increase).
This will impact the maximum earnings an employee may earn in order to bring an unfair dismissal claim, the maximum damages available to employees in unfair dismissal claims and the minimum amount an employee must earn before they can be given a “guarantee of annual earnings” (to avoid award obligations).
Unfair dismissal claims and the high-income threshold
Employees who are not covered by a modern award or enterprise agreement who earn the high-income threshold or above per year will be unable to bring an unfair dismissal claim against their employer. It is important to note that even very senior employees may be award covered in some circumstances if this is the case, the employee will still be able to make a claim.
Although some employees may not be able to make an unfair dismissal claim, they still have access to other claims such as general protections.
Increase to unfair dismissal damages
The maximum damages in an unfair dismissal claim is set at half the rate of the high-income threshold. Therefore the maximum damages available to employees who make an unfair dismissal claim will increase from $74,350 to $76,800 from 1 July 2020. The Commission has also increased the filing fee for general protections, unfair dismissal, and anti-bullying applications from $73.20 to $74.50.
Guarantee of annual earnings
Employees who are covered by a modern award may enter into an undertaking arrangement with their employer regarding the award’s conditions. An employee and employer can mutually agree that the provisions under the award will not apply to this employee in exchange for ‘guaranteed annual earnings’ of above the high-income threshold.
Even if the employee enters this arrangement, they will still be able to make an unfair dismissal claim, there is no way to avoid this for an award covered employee.
What does the high-income threshold include?
The Fair Work Act stipulates that the earnings that contribute to the high-income threshold amount do not only include employee wages. Employers will also need to consider any arrangements made on the employee’s behalf e.g. agreed monetary value of non-monetary benefits (such as a company car) and salary sacrifice arrangements.
The employer should not include any reimbursements or superannuation guarantee contributions when calculating the earnings to determine if the employee earns above the high-income threshold. Any payments that cannot be pre-determined should also be excluded from this calculation (i.e. bonuses, commissions, incentive-based payments or non-guaranteed overtime hours).
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The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact Employment Innovations for advice.