• Increase to the High Income Threshold under the Fair Work Act 2009 (Cth)
  • July 21, 2016 | Author: Adam Salter
  • Law Firm: Jones Day - Sydney, New South Wales Office
  • The High Income Threshold for former employees claiming unfair dismissal under the Fair Work Act 2009 (Cth) will increase from $136,700 to $138,900 on 1 July 2016. Under section 382, a person cannot bring a claim for unfair dismissal against a former employer where the sum of their annual rate of earnings exceeds the High Income Threshold, unless that employee is covered by a modern award or an enterprise agreement.

    The following payments are included when determining an employee's earnings: (i) wages; (ii) amounts dealt with on the employee's behalf or as they direct; and (iii) the agreed value of non-monetary benefits. However, payments that cannot be determined in advance (e.g. incentive-based bonuses or non-guaranteed overtime), reimbursements and compulsory superannuation contributions by an employer are not included when calculating an employee's earnings.

    The annual rate of earnings of an employee is calculated in accordance with regulation 3.05 of the Fair Work Regulations 2009 (Cth). Where an employee is continuously employed by the employer (and was not on leave without full pay at any time during the 12 months immediately before their dismissal), their annual rate of earnings will be the amount paid to the person in respect of the 12 months immediately before their dismissal. Therefore, while an employee's current annual salary may exceed the High Income Threshold, they may in fact fall under the threshold where they received a lower annual salary at any point during the 12 months immediately before their dismissal.

    For example, an employee receives an annual salary of $140,000 at the time of their dismissal on 1 July 2016, having received a pay increase on 1 January 2016 from $130,000 to $140,000. This employee still will be under the new High Income Threshold because the employee earned $65,000 for the first six months and $70,000 for the remaining six months, bringing their annual rate of earnings for the 12 months immediately before their dismissal to $135,000.