In accordance with the increase to the national minimum wage (our blog post on the minimum wage increase can be found here), the Fair Work Commission (Commission) has announced an increase to the application fee for unfair dismissals, general protections and anti-bullying applications to $74.50 from 1 July 2020.
High income threshold
The high income threshold for unfair dismissal applications has been increased to $153,600. The high income threshold prevents employees who earn that amount or more, from pursuing an unfair dismissal claim in the Commission if they are not covered by an award or enterprise agreement. There is no high income threshold for general protection applications.
In calculating how much an employee earns, for the purpose of determining whether they earn below the high income threshold, the following earnings are included:
- Amounts paid on behalf of the employee or at the employee’s direction
- Agreed reasonable value of non-monetary benefits (such as private use of company vehicle).
The following earnings are not included:
- Indeterminate payments (including items such as commissions, incentive-based payments and overtime that is not guaranteed)
- Statutory superannuation contributions (currently 9.5% of guaranteed earnings).
The compensation cap for unfair dismissals has also increased. The compensation cap is the maximum amount of compensation that can be awarded to an employee if they are successful in their unfair dismissal claim. The compensation cap is now $76,800 for dismissals that occur on or after 1 July 2020. There is no compensation gap for general protection applications.
High income employees and contracts
Where an employee is covered by a modern award and earns more than the high income threshold, a guarantee of annual earnings clause should be included in their contract of employment. By giving an employee a guarantee of annual earnings, any applicable award will not apply to the employee’s employment. The effect of including such a clause in a contract of employment is that it allows the employer to contract out of the applicable modern award while the employee is a high income employee.
However, it must be remembered that an award covered employee who receives a guarantee of annual earnings may still have access to the unfair dismissal jurisdiction because the guarantee will not affect award coverage.
It is an opportune time for employers to review employment contracts, particularly if the employee is earning over the high income threshold. For further information, or enquiries, please contact us on (03) 8621 4500.