29 Jun 2012

Unfair dismissal threshold under the Fair Work Act to rise from 1 July 2012

The high income threshold for the unfair dismissal provisions in the Fair Work Act will increase from 1 July 2012. Previously set at $118,100, the threshold will now be $123,300. At the same time, the compensation limit for unfair dismissal will increase to $61,650.

An employee’s earnings include wages, money that is paid on their behalf (such as superannuation top-ups or salary sacrifice), and the agreed value of non-monetary benefits (such as laptops and mobile phones). They don't include payments that can’t be set in advance (such as commissions, bonuses or overtime), reimbursements, or compulsory superannuation contributions.

Employees who earn above this amount (not including SGC superannuation) and who are not covered by an award or enterprise agreement are excluded from the unfair dismissal regime.

What effect will this have? The increase will enable more employees to access the unfair dismissal provisions. This would also have implications for how you manage these employees.

Of course, even if an employee is award/enterprise agreement free and earns more than the high income threshold, he or she could still challenge any dismissal using other mechanisms, including adverse action and actions for beach of contract.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.