By Sean Melbourne

While running a business can be incredibly rewarding, it can at times pose many challenges. Would you know what to do if you were confronted by a former employee claiming they were unfairly dismissed?

While you’d like to believe that your staff will always have your business’ best interests in mind, sometimes this is not the case. The repercussions of letting someone go from your team can feel daunting. Dismissing an employee doesn’t need to be a terrifying thought however.

It may come as a surprise to know that former employees are barred from making a claim of unfair dismissal, where their income exceeds the ‘high income threshold’ and they are not covered by either an enterprise agreement or an award.

We’ve broken down the recent changes to the high income threshold, and how these will affect you and your business should a claim ever arise.

What changes have been made to the high income threshold?

With the start of the new financial year, the Fair Work Commission has increased the high income threshold. As of 1 July 2018, the high income threshold increased from $142,000 to $145,400. This means an employee whose income exceeds $145,400, and who is not covered by an award or enterprise agreement, can’t bring an unfair dismissal claim if they were to be let go. For employers, this means that, provided you’ve followed any applicable internal policies, you can dismiss your employee by giving notice, without being at risk of them bringing an unfair dismissal claim.

Are my employees covered by an Award or Enterprise Agreement?

It’s also important to know that, regardless of how much your ex-employee earnt, they can still bring a claim for unfair dismissal if they were covered by an award or enterprise agreement. You should check whether this is the case before dismissing an employee, so you know whether an unfair dismissal claim could be brought.

You’d be aware if your employees are covered by an enterprise agreement as these apply to particular workplaces. Awards on the other hand apply to all employees in the industry and classifications that the award covers. So, an employee could fall under an award even though you haven’t been applying it because they are on a high salary. If you’re unsure whether your employees are covered by an award, you can get help from the Fair Work Commission on 1300 799 675, or talk to an employment lawyer.

Can a former employee make a claim?

The increase to the high income threshold means that employees who would have been previously barred from bringing a claim may now have the ability to do so. But keep in mind that an employee has to have been with your business for six months before they can bring an unfair dismissal claim, or one year if you employ less than 15 staff.

What you’ve paid your ex-employee during their employment will ultimately determine whether they can bring a claim for unfair dismissal. As an employer, it’s helpful to be aware of what constitutes an employee’s ‘income’, because it includes more than just wages. Under the Fair Work Act 2009 (Cth), income may include:

  • Wages
  • The value of non-monetary benefits
  • Guaranteed or pre-determined overtime agreed to by you and the employee
  • Vehicles, where private use has been granted
  • The likes of laptops and mobile phones, where private use has been granted
  • Any superannuation payments that exceed the required compulsory contribution.

These are just some of the payments that the Fair Work Commission may consider when assessing the income of your former employee to determine if they can pursue an action for unfair dismissal.

Importantly, the Commission also has the discretion to consider a non-monetary benefit when they’re calculating your former employee’s income if they can place a value on the benefit.

What’s not included as income?

However, not every payment you make to your employees will be included in what is deemed to be their ‘income’. Payments that are unlikely to be included are those that cannot always be guaranteed or calculated ahead of time; such as:

  • Bonuses
  • Commissions
  • Overtime that has not been previously agreed to by you and your employee
  • Compulsory superannuation contributions
  • Meal, accommodation or travel allowances

How much compensation gets awarded to successful claimants?

As of 1 July, the cap on compensation for unfair dismissal claims has also been increased, to the lesser of six months of wages or 50 per cent of the high income threshold ($72,700). This means that if compensation is awarded to your former-employee for an unfair dismissal, the amount of compensation you’d have to pay wouldn’t exceed this amount.

Need some help?

Source Legal can help you with specialist advice on any employment law matter, including advice and assistance with unfair dismissal claims. Talk to our head of employment law, Sean Melbourne, to see how we can help you.

By | Published On: 21st July, 2018 | Categories: Employment law, Guides |