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:
“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”:
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